Asian stocks slide as Fed hike fears push Wall Street into a bear market

HONG KONG (Reuters) – Asian stocks fell sharply and the safe-haven dollar settled near a two-decade peak on Tuesday after Wall Street posted a definite milestone in a bear market amid concerns that sharp US interest rate increases could push the world’s largest economy. in stagnation.

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It fell 0.45% in choppy trading, recovering some of its earlier losses.

Australia Standard S&P / ASX200 (.AXJO) Closed 3.55% lower while Japan’s Nikkei closed (.N225) It was down 1.32%, after falling as much as 2% earlier in the session.

The negative tone in Asia came on the heels of the gloomy US session on Monday, which saw Goldman Sachs forecast a 75 basis point interest rate hike at the Fed’s next monetary policy meeting on Wednesday. Read more

However, investors seem to be shaking off the gloom heading into European trade, with Euro Stoxx 50 futures up 0.83%, German DAX futures up 0.9%, and FTSE futures adding 0.62%. US stock futures also added 1.17%.

“While there is a clear risk of a significant policy tightening, it remains unlikely that there will be a full-blown recession, with the unemployment rate jumping by two percentage points or more,” said Stephen Kokolas, managing director of Canberra-based Marketplace. Economics.

“Instead, growth is almost certain to slow – which is the goal of policy tightening – and by late this year, inflation pressures should begin to subside.”

In Hong Kong, the Hang Seng Index (.HSI) It trimmed earlier losses to rise 0.26% after trading in negative territory for most of the day. Chinese CSI300 Index (.CSI300) It regained some of its lost gains to fall 0.23%.

Expectations of a US interest rate hike rose after inflation in the year to May jumped more-than-expected by 8.6%.

“The US market is the largest in the world, so when it catches a cold the rest of the world does too,” said Clara Cheung, global market analyst at JPMorgan Asset Management.

“There will be short-term volatility in Asia, but we believe that in the medium to long term in Asia excluding Japan, earnings expectations have already been lowered, so there is a relatively brighter outlook here than in other parts of the world.”

Cheung said monetary easing in China and the reopening of ASEAN economies from the COVID-19 lockdown could protect the region from some financial market fallout.

On Wall Street Overnight, Fears of a US Recession Pushed the S&P 500 Index (.SPX) The Nasdaq is down 3.88%. (nineteenth) He lost 4.68%. Dow Jones Industrial Average (.DJI) It fell 2.8%.

The benchmark S&P 500 is now down more than 20% from its record closing high, confirming the existence of a bear market, according to a commonly used definition.

Benchmark 10-year Treasury yields hit their highest since 2011 on Monday and a major part of the yield curve inverted for the first time since April, as investors braced for the possibility that the Federal Reserve’s attempts to stem high inflation will weigh on the economy.

The yield on the benchmark 10-year Treasury rose to 3.3466% compared to its US close of 3.371% on Monday. The two-year yield was up as traders expected a Fed funds rate hike, and it touched 3.3804% compared to the US close at 3.281%.

In currency markets, the dollar index, which measures the greenback against a basket of major currencies, was at 104.98, far from a two-decade high of 105.29 hit on Monday. Read more

Against the Japanese yen, the US currency was at 134.59, just below its recent high of 135.17.

The European single currency rose 0.2% to $1.0432, after losing 2.8% in one month.

Bitcoin fell about 4.5% on Tuesday to $21,416, a new 18-month low, extending from Monday’s 15% drop as markets were shaken by crypto lender Celsius halting withdrawals. Read more

Oil markets began to recover in the late Asian session, with US crude rising 0.13% to $121.08 a barrel, after falling for most of Tuesday. Brent crude rose slightly to $ 122.42 a barrel.

Gold shrugged off a weaker start with spot up 0.42% to $1,826.65 an ounce.

Additional reporting by Scott Murdoch in Hong Kong; Additional reporting by Elon John. Editing by Sam Holmes

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