Stocks in Asia dropped as the dollar and Treasury yields climbed, with investors reassessing the global economy’s outlook given expectations for higher interest rates.
(Bloomberg) — Stocks in Asia dropped as the dollar and Treasury yields climbed, with investors reassessing the global economy’s outlook given expectations for higher interest rates.
An Asia equity benchmark gave up a 0.5% gain as most gauges in the region came off their highs. The Hang Seng Index fluctuated as the removal of a mask mandate in Hong Kong was met with selling pressure from end of the month adjustments. Chinese gauges also saw big swings.
US contracts were rangebound following a 0.3% advance for the S&P 500 and a 0.7% gain for the tech-heavy Nasdaq 100 on Monday.
Treasury yields ticked higher across tenors, with the two- and the 10-year advancing by more than two basis points. The Bloomberg Dollar Spot Index climbed after falling 0.3% on Monday. All of G-10 currencies traded weaker versus the dollar.
“It seems a lot of traders are not confident in this rally as the economy still looks too strong for disinflation trends to resume,” Edward Moya, a senior market analyst at Oanda, wrote in a note. ”The Fed has a lot more work to do and that should be a difficult environment for stocks.”
Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago. Federal Reserve Governor Philip Jefferson firmly stood by the central bank’s 2% inflation goal on Monday. A series of hawkish Fed speak this month has trimmed January’s gains across markets.
US data on Monday further outlined the challenge facing the central bank. Pending home sales increased in January by the most since June 2020. Durable goods orders fell, but after accounting for a drop in transportation equipment rose more than expected. Orders placed with factories for business equipment also rose.
Tribeca Investment Partners expects to see more inflows into the Treasury market over the next three to six months. “The short end of the curve certainly looks quite attractive at the moment,” Jun Bei Liu, a portfolio manager, said on Bloomberg Television.
The next key agenda in Asia is China’s National People’s Congress, due to kick off this weekend. Investors are looking for more pro-growth measures that could revive the China stock rally. Abrdn plc said the firm is more positive on Chinese onshore shares versus offshore peers due to potential policy windfall.
Investors are also keeping a close eye on Adani Group shares as the conglomerate continues an investor roadshow in the region. Most of the group’s stocks rose after one of the conglomerate’s top executives said it is not seeking to refinance debt or inject capital while continuing efforts to rebuild investors’ confidence.
Developer China Evergrande Group has yet to reach an agreement with major creditors on a debt restructuring framework as key deadlines loom. The company, which is at the epicenter of China’s real estate crisis, has said it wanted to get support from the noteholders by early March and it faces a March 20 court hearing in Hong Kong on a winding-up petition.
Read More: Traders See US Economy as a Balloon Directed by Multiple Forces
Elsewhere, oil was set for a fourth straight monthly decline as concerns about tighter monetary policy and swelling stockpiles in the US eclipsed optimism about rising demand in China. Gold headed for its worst month since the middle of 2021.
Key events this week:
- US wholesale inventories, Conf. Board consumer confidence, Tuesday
- China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Wednesday
- Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
- US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
- Eurozone CPI, unemployment, Thursday
- US initial jobless claims, Thursday
- Eurozone S&P Global Eurozone Services PMI, PPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:37 a.m. London time. The S&P 500 rose 0.3%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 0.7%
- Euro Stoxx 50 futures were little changed
- Japan’s Topix index was little changed
- South Korea’s Kospi index rose 0.4%
- Hong Kong’s Hang Seng Index was little changed
- China’s Shanghai Composite Index rose 0.4%
- Australia’s S&P/ASX 200 Index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.0589
- The Japanese yen was little changed at 136.24 per dollar
- The offshore yuan was little changed at 6.9583 per dollar
- The British pound fell 0.1% to $1.2047
Cryptocurrencies
- Bitcoin was little changed at $23,401.65
- Ether rose 0.1% to $1,629.19
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.93%
- Australia’s 10-year yield declined two basis points to 3.85%
Commodities
- West Texas Intermediate crude rose 0.6% to $76.14 a barrel
- Spot gold fell 0.1% to $1,814.97 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Akshay Chinchalkar, John Cheng and Michael G. Wilson.
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