Stocks slump deepens, dollar rises on haven demand: market wrap

Equities extended their decline in Asia while the dollar rose against major currencies including the yen as investors weighed the of risk of recession and tighter monetary policy.

Shares in Hong Kong were headed to the lowest level in a decade, led by technology companies, and a gauge of mainland China stocks tumbled toward a fresh two-year low. South Korea’s benchmark index fell after the central bank pivoted back to outsized interest-rate increases.

Stocks in Japan and Australia fluctuated while US futures inched higher after the S&P fell for the fifth consecutive session. The Nasdaq 100 struck a fresh two-year low.

The risk aversion bolstered the dollar and the yen weakened beyond a level that in the past has triggered intervention as investors prepare for higher US rates while the Bank of Japan sticks with ultra-easy policy.

Markets remain jittery after comments from Bank of England Governor Andrew Bailey, who said the BOE would end its special support of the gilts market. Bailey’s stance adds to the concerns of investors challenged by hawkish policy makers. Cleveland Federal Reserve President Loretta Mester said monetary settings needed to tighten further to quell inflation.

“I don’t see any imbalances yet that would cause a pivot from the Fed,” Citigroup Inc. economist Veronica Clark said on Bloomberg Television. “The Fed will pay attention to global financial stability concerns, a strong dollar is part of that, but it’s ultimately going to be domestic conditions and what the Fed is seeing on inflation.”

The drop in Chinese stocks came after little support was seen from aggregate financing and new yuan loans data that both beat consensus estimates by a wide margin. The outlook for China’s economy, which is struggling with Beijing’s Covid curbs and headwinds in the technology and property sectors, continues to cast a shadow over markets in Asia.

Gilts trading had closed prior to Bailey’s comments. In addition to the impact on the pound, the 10-year Treasury yield on Tuesday closed at the highest level since 2010.

Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”

Elsewhere, oil dropped for a third day on escalating concerns about a global slowdown, with US President Joe Biden saying a recession was possible. Gold held steady in Asia.

Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.

Key events this week:

• Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
• FOMC minutes for September meeting, Wednesday
• US PPI, mortgage applications, Wednesday
• OPEC Monthly Oil Market Report, Wednesday
• Fed’s Michelle Bowman and Neel Kashkari speak
• ECB’s Christine Lagarde speaks
• US CPI, initial jobless claims, Thursday
• G-20 finance ministers and central bankers meet, Thursday
• China CPI, PPI, trade, Friday
• US retail sales, business inventories, University of Michigan consumer sentiment, Friday
• BOE emergency bond buying is set to end, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 rose 0.2% as of 12:55 p.m. Tokyo time. The S&P 500 fell 0.7%
• Futures on the Nasdaq 100 rose 0.3%. The Nasdaq 100 fell 1.2%
• The Topix Index was little changed
• The S&P ASX Index rose 0.1%
• The Hang Seng Index fell 2%
• The Shanghai Composite Index fell 1.2%
• Euro Stoxx 50 futures fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $0.9700
• The Japanese yen fell 0.2% to 146.20 per dollar
• The offshore yuan was little changed at 7.1749 per dollar
• The British pound fell 0.2% to $1.0948

Cryptocurrencies

• Bitcoin rose 0.2% to $19 059
• Ether rose 0.2% to $1,284

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.93%
• Australia’s 10-year yield declined seven basis points to 3.96%

Commodities

• West Texas Intermediate crude fell 0.8% to $88.64 a barrel
• Spot gold was little changed

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