Asian stocks slide as markets brace for rate hikes
Asian stocks fell the most in two weeks as investors prepare for rapid US rate rises and slowing growth
Singapore — Asian stocks fell the most in two weeks on Monday as concern about rapid US rate rises and slowing growth rattled investors, while the euro found support after Emmanuel Macron won a second term as French president.
MSCI's broadest index of Asia-Pacific shares outside Japan slid 1.6% to a six-week low, and a nudge from authorities extended steep losses for the Chinese yuan.
Japan's Nikkei fell 1.9%. Hong Kong's Hang Seng fell 3%. S&P 500 futures dropped 0.8%, while FTSE futures and European futures were off by more than 1%. Oil fell 2.7%.
The euro was broadly steady at $1.0802, compared with broad dollar gains elsewhere, and it touched an almost two-month high against a struggling sterling.
Macron comfortably saw off a far-right challenge, reassuring markets about France's commitment to an integrated Europe, even if his economic platform now depends on parliamentary elections in June.
“The absence of a change, of course, will reassure not only the other EU countries but also Nato,” said Vincent Mortier, chief investment officer of Amundi, Europe's largest fund manager.
Spiking food and gasoline prices plus the end of key stimulus programmes has investors concerned about the low-income consumer's ability to spend.Candace Browning, head of global research at Bank of America
The news was small relief, though, for broader worry about a global backdrop of high inflation and likely rate rises that have been pounding bond markets for months, worsened by war in Ukraine and disruption from coronavirus-related lockdowns in China.
US shares had tumbled at the end of last week after Federal Reserve chair Jerome Powell said a 50 basis-point (bps) rate hike was on the table at this year's May meeting and St Louis Fed President James Bullard floated the idea of 75 bps hikes.
“Concerns around rates and recession are now the biggest risks for investors” with a particular focus on demand, said Candace Browning, head of global research at Bank of America.
“Spiking food and gasoline prices plus the end of key stimulus programmes has investors concerned about the low-income consumer's ability to spend.”
The Treasury market steadied, keeping the benchmark 10-year yield at 2.8581% and the two-year yield off last week's highs at 2.6399%.
Harsh restrictions in China have also begun to spread to Beijing, where more than a dozen buildings have been locked down as concern grows about the economic damage of the shutdown of Shanghai.
China's blue-chip CSI 300 index fell to its lowest since June 2020 and investors have so far been underwhelmed by policy support for the flagging economy.
The middle of China's onshore currency trading band was fixed at its lowest level in eight months on Monday, seen as an official nod for the yuan's recent slide and it was quickly sold to a one-year low of 6.5225 a dollar.
The dollar was also on the march elsewhere, though trade was thinned a bit by public holidays in Australia and New Zealand. The Aussie slid 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, buffeted by weak retail sales figures last week, slipped 0.3% to an 18-month low of $1.2792.
Brent crude futures dropped 2.7% to a two-week low of $103.88 a barrel. US crude futures fell 2.6% to $99.38 a barrel.
Copper and iron ore fell in Asia, though soybean oil jumped after an Indonesian ban on palm oil export.
The week ahead is headlined by US growth data due on Thursday, European inflation figures due on Friday and a monetary policy meeting for the Bank of Japan (BOJ).
Investors expect US growth to steady around 1.1%, far slower than the Covid-19 rebound-juiced figures of the recent past, but probably robust enough to bear rate rises.
The BOJ meeting will also be closely watched for any adjustments to economic projections or any signs of a policy response to the yen, which has tumbled more than 10% in two months.
Bitcoin held on just above resistance at $40,000.
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