Asian equities fell Wednesday after the S&P 500 tumbled by the most in two months and Treasury yields rose sharply as investors priced in higher interest rates.
(Bloomberg) — Asian equities fell Wednesday after the S&P 500 tumbled by the most in two months and Treasury yields rose sharply as investors priced in higher interest rates.
Shares in Australia, Japan and mainland China fell, while Hong Kong’s Hang Seng Index fluctuated after falling earlier in the day to levels that would mark a 10% correction from its late-January high.
US futures were up marginally after the S&P 500 tumbled 2% on Tuesday in a decline that touched all major sectors, while the tech-heavy Nasdaq 100 dropped 2.4%. Weak forecasts from US retailing bellwethers added to the negative tone.
The benchmark 10-year Treasury yield slipped marginally after rising 14 basis points Tuesday. Australian yields trimmed their gains after weaker-than-expected wages growth data, which also weighed on the Australian dollar.
The yield on 10-year Japanese government debt touched 0.505%, breaching the Bank of Japan’s threshold for a second day as traders prepared to hear from the new central bank governor nominee.
The New Zealand dollar edged higher versus the greenback after the central bank raised interest rates 50 basis points. While the increase marks a downshift from prior hikes, policy makers still see higher rates ahead.
The dollar was flat after an overnight rally against Group-of-10 currencies. Purchasing managers’ index readings for services and manufacturing that came in stronger than expected underpinned gains in Treasury yields and the currency.
The action in the US marked a shift in perception on rates. Investors are pricing in the federal funds rate climbing to around 5.3% in June. That compares with a perceived peak of 4.9% just three weeks ago and follows a ratcheting up of rhetoric from central bank officials over the past week.
“A tight labor market and resilient consumer demand could goad the Federal Reserve to maintain its rate hiking campaign into the summertime,” said Jeffrey Roach, chief economist for LPL Financial. “Investors should expect volatility until markets and central bankers come to agreement on the expected path for interest rates.”
A rocky geopolitical outlook has not helped. President Vladimir Putin said Russia will suspend its observation of the New START nuclear weapons treaty with the US, a decision Secretary of State Antony Blinken called “irresponsible.” President Joe Biden hit back at Putin, saying he would never win his war in Ukraine.
The White House would be open to sanctioning Chinese companies that support Russia’s invasion of Ukraine, Deputy Treasury Secretary Wally Adeyemo said.
Elsewhere, the price of Brent crude rose after a Tuesday drop that curtailed a recent rally on the hopes of growing Chinese demand.
Key events this week:
- US MBA mortgage applications, Wednesday
- Federal Reserve releases minutes from its latest policy meeting, Wednesday
- Eurozone CPI, Thursday
- US GDP, initial jobless claims, Thursday
- Atlanta Fed President Raphael Bostic speaks, Thursday
- BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
- US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
- Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets as of 12:40 p.m. Tokyo time
Stocks
- S&P 500 futures rose 0.2%. The S&P 500 fell 2%
- Nasdaq 100 futures climbed 0.3%. The Nasdaq 100 fell 2.4%
- Japan’s Topix fell 1.1%
- Australia’s S&P/ASX 200 fell 0.4%
- Hong Kong’s Hang Seng fell 0.2%
- The Shanghai Composite fell 0.3%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0656
- The Japanese yen was little changed at 134.90 per dollar
- The offshore yuan fell 0.1% to 6.9003 per dollar
Cryptocurrencies
- Bitcoin fell 0.1% to $24,163.9
- Ether rose 0.3% to $1,646.58
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.93%
- Australia’s 10-year yield advanced two basis points to 3.84%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth and Akshay Chinchalkar.
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