Stocks slide, dollar climbs as rate hike concern in focus

article material

SINGAPORE – Asian shares fell by the most in two weeks on Monday as worries about a faster US rate hike and slowing growth ruffled investors, while the euro gained support after Emmanuel Macron won a second term as French president .

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6% to a six-week low, and a nudge from officials led to heavy losses for the Chinese yuan.

Japan’s Nikkei fell 1.9%. Hong Kong’s Hang Seng fell 3%. S&P 500 futures were down 0.8% while FTSE futures and European futures were down more than 1%. Oil fell 2.7%.

article material

The euro was broadly stable at $1.0802, compared to the dollar’s broader gains elsewhere, and touched a nearly two-month high against a struggling sterling.

Macron sees a far-right challenge at ease, reassuring markets about France’s commitment to a unified Europe, even though his economic platform now depends on parliamentary elections in June.

“The absence of a change of course will reassure not only other EU countries but also NATO,” said Vincent Mortier, chief investment officer at Amundi, Europe’s largest fund manager.

The news was little relief, however, to the global backdrop of high inflation and widespread concern about potential rate hikes that have been pounding bond markets for months – disruption from the war in Ukraine and coronavirus-related lockdowns in China.

article material

US stocks fell late last week after Federal Reserve Chairman Jerome Powell said a 50-basis-point rate hike was on the table at the May meeting and St. Louis Fed Chairman James Bullard had proposed a 75 bp hike. she came.

Candace Browning, head of global research at Bank of America, said “worries about rates and a recession are now the biggest risk for investors” with a particular focus on demand.

“Rising food and gasoline prices and the end of major stimulus programs have investors concerned about the spending capacity of the low-income consumer.”

The Treasury market remained stable, keeping the benchmark 10-year yield at 2.8581% and the two-year yield at last week’s high of 2.6399%.

yuan slide

Tougher restrictions in China are beginning to spread even in Beijing, where more than a dozen buildings have been closed, as concerns mount about the economic damage from Shanghai’s closure.

article material

China’s blue-chip CSI 300 index has fallen to its lowest level since June 2020 and investors have so far been overwhelmed by policy support for the flagging economy.

The middle of China’s onshore currency trading band was set at its lowest level in eight months on Monday, which was seen as an official nod to the yuan’s recent slide and quickly recovered to a one-year low of 6.5225 per cent. was sold on the dollar.

The dollar was also up elsewhere in March, although trading was slightly dampened by public holidays in Australia and New Zealand. The Australian fell 0.8% to a six-week low of $0.7185 and the Kiwi fell 0.4% to a two-month low of $0.6603.

Sterling slipped 0.3% to an 18-month low of $1.2792, fueled by weak retail sales data last week.

Brent crude futures fell 2.7% to a two-week low of $103.88 a barrel. US crude futures fell 2.6% to $99.38 a barrel.

article material

Copper and iron ore fell in Asia, although soybean oil jumped after Indonesian restrictions on palm oil exports.

The week ahead is headlined by US growth data due on Thursday, European inflation data due on Friday and a monetary policy meeting for the Bank of Japan.

Investors expect US growth to hold steady around 1.1%, slower than recent days’ COVID-19 rebound-juice figures, but probably strong enough to tolerate rate hikes.

The BOJ meeting will also be closely watched for any adjustments to economic projections or any indication of a policy response to the yen, which has fallen more than 10% in two months.

Bitcoin stayed just above the resistance at $40,000.

(Reporting by Tom Westbrook; Editing by Muralikumar Anantharaman)