Asian stocks end the quarter in a gloomy mood, and the dollar is rising

Men wearing protective masks amid the outbreak of the coronavirus disease (COVID-19), use mobile phones in front of an electronic board displaying Japan’s Nikkei index outside a brokerage in Tokyo, Japan, June 16, 2022. REUTERS/Kim Kyung-Hoon

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  • Asian stock markets:
  • Nikkei fell 0.8%, futures fell on Wall Street
  • Japan’s production data is weak, but China’s services are improving
  • US data is expected to show an increase in core inflation
  • Dollar Holds Big Gains, Bonds Rebound

SYDNEY (Reuters) – Asian stocks ended nearly a quarter in a gloomy mood on Thursday amid concerns that central banks’ treatment of inflation will end up upsetting the global economy, although it is proving to be a safe haven catalyst. Dollar and government bonds.

Policymakers on Wednesday reiterated their commitment to keeping inflation under control no matter how much pain it has caused, and US core price data later in the session will underline the extent of the challenge. Read more

Analysts at ANZ warned that “inflation could be flat”. “It is expanding from goods to services and wage growth is accelerating.”

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“Even with the rapid rise in interest rates, it will take time for the distress in the labor markets to subside, meaning that inflation can remain higher for a longer period.”

This suggests that it is too early to pick a peak for interest rates or a bottom for stocks, even though the markets have already pulled back a lot.

The S&P 500 (.SPX) lost nearly 16% this quarter, its worst performance since the start of the pandemic, while the Nasdaq (.IXIC) is down 21%.

Early Thursday, S&P 500 futures and Nasdaq futures were down 0.3% with little sign so far that the new quarter will bring brave bargain hunters.

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS) slid another 0.4%, taking its losses for the quarter to 10%.

Japan’s Nikkei (.N225) is down 0.8%, although its decline this quarter has been a relatively modest 4% thanks to a weak yen and the Bank of Japan’s strict adherence to super-easy policies.

The need for stimulus was underlined by data showing Japanese industrial production fell 7.2% in May, when analysts had been looking at a drop of just 0.3%. Read more

Leading Chinese companies (.CSI300) added 0.6% with the help of a survey that showed a remarkable recovery in services activity.

Analysts at JPMorgan are looking forward to a major recovery in China in the coming months, and felt that with so much bad news in global markets, the situation calls for a rebound.

“We do not believe that the world and economies are in good shape, but only because the average investor expects economic catastrophe, and if this does not materialize, risky asset classes can recover most of their losses from the first half,” he wrote in a note.

dollars in demand

For now, the risk of a recession was enough to bring US 10-year yields back to 3.085% from their recent peak of 3.498%, although that is still up 77 basis points for the quarter.

The yield curve has continued to flatten, turning negative in a three to seven-year range, while futures are almost fully priced against another 75 basis point Fed increase in July.

The Fed’s hawkishness combined with investors’ desire for liquidity in tough times gave the US dollar its best quarter since late 2016. The dollar index was trading at 105,100 which is just a slight shy of its two-decade high of 105.79.

The euro was struggling at $1.0442, having lost 5.6% for the quarter so far, although it remained just above its May low of $1.0348.

The Japanese yen is in worse shape, with the dollar gaining more than 12% this quarter to 136.70 and hitting its highest level since 1998.

Higher interest rates and a stronger dollar were not good for non-yielding gold, which remained stuck at $1,818 an ounce after losing 6% during the quarter.

Oil prices were flat on Thursday amid concerns about an unreasonable slowdown in US gasoline demand, even as global supplies remain tight.

OPEC and OPEC+ ended two days of their meetings on Thursday with little expectations that they would be able to pump more oil despite pressure from the United States to expand quotas. Read more

Brent crude for September rose 2 cents to $112.47 a barrel, while US crude fell 5 cents to $109.73.

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Reporting from Wayne Cole.

Our Standards: Thomson Reuters Trust Principles.

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