US equity futures and Asian stocks fell Thursday as a hawkish drumbeat from central banks reverberated across markets, supporting the dollar and pushing up sovereign-bond yields.
(Bloomberg) — US equity futures and Asian stocks fell Thursday as a hawkish drumbeat from central banks reverberated across markets, supporting the dollar and pushing up sovereign-bond yields.
An Asian share index dropped to a six-week low, dragged down by the tech sector, with China’s bourses among the few to show any resilience. Contracts on the S&P 500 and tech-heavy Nasdaq 100 also slid. The latter shed 1% after chipmaker Nvidia Corp. sank in extended trading on a sales warning.
The jitters come after the worst month since June for US shares, reflecting fears of slowing growth alongside restrictive monetary policy to curb inflation. The two-year Treasury yield touched 3.50% for the first time since 2007 amid a fixed-income selloff that also buffeted bonds in Australia and New Zealand.
The dollar advanced and the euro pared earlier gains that were sparked by expectations of a bigger euro-area rate hike to cool record price pressures. The yen fell to a fresh 24-year low, heading closer to the 140 per-dollar level.
Stocks are entering a month that is often poor for returns after an August of losses across key asset classes. A bounce in global shares from June lows is fizzling as the Fed pushes back against bets on tempered rate hikes. Global bonds, meanwhile, are sliding toward the first bear market in a generation.
The market is getting the message that the US central bank is going to fight inflation at all costs, Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Radio. “I don’t think we’ve seen the bottom for this year,” she added.
No Cuts
Cleveland Fed President Loretta Mester reiterated the central bank needs to raise its benchmark rate above 4% by early next year. She said she doesn’t anticipate rate cuts in 2023.
Elsewhere, oil was on the back foot, sliding to about $89 a barrel. Aggressive Federal Reserve tightening and China’s slowdown are dimming the demand outlook. Bitcoin weakened, hovering around the closely watched $20,000 level.
Traders were also assessing the implications of a report that Tencent Holdings Ltd. has set a soft target of divesting about 100 billion yuan ($14.5 billion) of its $88 billion listed equity portfolio.
Elsewhere in China, the central bank again leaned against currency weakness, setting a stronger-than-expected yuan fixing for a seventh straight day.
Here are some key events to watch this week:
- ECB Governing Council members due to speak at event Tuesday through Sept. 2
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday. Winner announced Sept. 5
Will Chinese sovereign bonds outperform Treasuries? China is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.6% as of 10:35 a.m. in Tokyo. The S&P 500 fell 0.8%
- Nasdaq 100 futures fell 1%. The Nasdaq 100 fell 0.6%
- Japan’s Topix index slid 1.3%
- South Korea’s Kospi index dropped 1.6%
- Australia’s S&P/ASX 200 Index lost 2%
- Hong Kong’s Hang Seng Index slid 1.4%
- China’s Shanghai Composite Index fell 0.2%
- Euro Stoxx 50 futures declined 0.9%
Currencies
- The Bloomberg Dollar Spot Index was up 0.3%
- The euro was at $1.0028, down 0.3%
- The Japanese yen was at 139.42 per dollar, down 0.3%
- The offshore yuan was at 6.9141 per dollar, down 0.1%
Bonds
- The yield on 10-year Treasuries rose two basis points to 3.21%
- Australia’s 10-year yield increased 12 basis points to 3.71%
Commodities
- West Texas Intermediate crude fell 0.2% to $89.41 a barrel
- Gold was at $1,704.63 an ounce, down 0.4%
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