Asia Stocks Poised to Fall Before Fed Hawkish: Markets Roundup

(Bloomberg) — Asian stocks fell after U.S. stocks fell and Treasury yields hovered near multi-year highs as investors position themselves for a sharp rise in interest rates from an aggressive Federal Reserve. .

Stocks fell in Japan, Hong Kong and Australia after the S&P 500 index fell more than 10% below its August high, marking the peak of its recovery from this year’s low. US contracts fluctuated and European stock futures fell.

Two-year Treasury yields fell from around 4% as traders weigh the risk that monetary tightening will push the economy into recession. The Bank of Japan announced an unscheduled bond purchase as it seeks to limit upward pressure on yields ahead of a policy decision later this week.

A gauge of the dollar traded near a record high amid market jitters, while Bitcoin hovered around the $19,000 level. The offshore yuan fell to the lowest level against the dollar since mid-2020, even after the People’s Bank of China set the daily benchmark rate for the stronger-than-expected currency for a 20th day.

Fed officials are about to put numbers on the “pain” they have been warning about when the central bank releases new economic projections on Wednesday. They are expected to rise 75 basis points again, according to the vast majority of analysts surveyed by Bloomberg. Only two project a movement of 100 basis points.

“Volumes remain light and the mood cautious, with few looking to take big positions before hearing what the Fed says and where policymakers see rates at the end of the hike cycle,” said Fiona Cincotta, senior analyst at City Index Financial Markets. . “This is what will drive the markets, not the rate hike tomorrow, but what the Fed plans to do next.”

Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession in late 2022 that could last all of 2023 and a sharp correction in the S&P 500. “Even in a simple recession, the S&P 500 can fall 30%”, said the president of Roubini Macro Associates. In “a real hard landing,” which he expects, it could drop 40%.

Still, some professional speculators are refusing to give in to a punishing stock market prone to volatility, driving bullish and bearish positions at the fastest pace in five years. When the S&P 500 tumbled last week, hedge funds snapped up individual stocks as they bet against the broader market with products like exchange-traded funds, data from top brokerage Goldman Sachs Group Inc shows.

Christopher Smart, chief global strategist at Barings LLC, said equity markets faced more stress from weaker valuations, while certain corners of credit markets remained attractive. “Investment grade and high yield are places where my colleagues find a lot of opportunity,” he said on Bloomberg Television. “The fundamentals of the US economy are very solid. They need to weaken a little bit to cool down some of these inflationary pressures, but you can find a lot of companies that have strong balance sheets.”

In other markets, oil fluctuated around $84 a barrel as it headed for its first quarterly loss in more than two years amid concerns about energy demand. Gold held steady near a two-year low.

Key events this week:

  • Federal Reserve decision, followed by a press conference with Chairman Jerome Powell, on Wednesday
  • The CEOs of the big banks testify before the US Congress in a pair of hearings on Wednesday and Thursday.
  • US Existing Home Sales, Wednesday
  • EIA Crude Oil Inventory Report, Wednesday
  • Bank of Japan monetary policy decision, Thursday
  • The Bank of England interest rate decision, Thursday
  • US Conference Board Leading Index, Initial Jobless Claims, Thursday

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Some of the main movements in the markets:

Stocks

  • S&P 500 futures were up 0.2% at 1:01 p.m. in Tokyo. The S&P 500 fell 1.1%
  • Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.9%
  • Japan’s Topix fell 1.1%
  • Australia’s S&P/ASX 200 index fell 1.4%
  • South Korea’s Kospi index fell 0.8%
  • Hang Seng Index fell 1.5%
  • Euro Stoxx 50 futures fell 0.2%

coins

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was stable at $0.9966
  • The Japanese yen was trading at 143.82 per dollar
  • The offshore yuan fell 0.3 to 7.0498 against the dollar

Captivity

  • 10-year Treasury bond yield held steady at 3.56%
  • Australia’s 10-year government bond yield rose nine basis points to 3.72%.

raw Materials

  • West Texas Intermediate crude fell 0.5% to $84.01 a barrel.
  • Gold futures trade at $1,663.85 an ounce

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