Stocks extended declines on Wednesday amid a jump in Treasury yields and the dollar on expectations of aggressive monetary tightening by the Federal Reserve to tackle inflation.
(Bloomberg) — Stocks extended declines on Wednesday amid a jump in Treasury yields and the dollar on expectations of aggressive monetary tightening by the Federal Reserve to tackle inflation.
Equities fell in Australia, Japan and South Korea, while US and European contracts were also in the red. The S&P 500 dipped Tuesday but held above the closely-watched 3,900 level. US-listed Chinese shares posted their worst drop since mid-July.
Bonds in Australia and New Zealand slid after a selloff in Treasuries, which was helped along by a slew of corporate debt offerings and solid US service-sector activity. The 30-year US yield is around the highest level since 2014. The economic data spurred bets on another 75 basis points Fed interest-rate hike.
The Bloomberg Dollar Spot Index hit another record. The yen slid to a fresh 24-year low. Greenback strength is rippling across the world, squeezing financial conditions and stoking inflation in other economies as rival currencies drop.
Markets are also contending with a debilitating energy crisis in Europe and Covid lockdowns in China, which continues to pursue a strategy of eliminating the virus despite the attendant economic cost. Concerns are growing about the outlook for company earnings given the various global economic headwinds.
“Many investors are walking on egg shells,” Kristina Hooper, chief global market strategist at Invesco, said on Bloomberg Television. “The real issue is that it could be a one-two punch. We could see the Fed continuing to pummel the economy with a significant rate hike, lets say 75 basis points, and then of course we get downward revisions to earnings that are significant.”
Elsewhere, Bitcoin added to a retreat to below $19,000. Crude dropped below $87 a barrel, hampered by worries about demand.
What to watch this week:
- Apple event due to feature new iPhones, watches, Wednesday
- Bank of England Governor Andrew Bailey at Treasury Committee, Wednesday
- Fed’s Beige Book of regional economic activity, Wednesday
- Cleveland Fed President Loretta Mester due to speak, Wednesday
- European Central Bank rate decision, Thursday
- Fed Chair Jerome Powell due to speak, Thursday
- Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari due to speak, Thursday
- EU energy ministers extraordinary meeting on emergency intervention in electricity markets, Friday
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Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.6% as of 9:25 a.m. in Tokyo. The S&P 500 fell 0.4%
- Nasdaq 100 futures dropped 0.7%. The Nasdaq 100 fell 0.7%
- Japan’s Topix index shed 0.9%
- Australia’s S&P/ASX 200 index fell 1%
- South Korea’s Kospi lost 1.2%
- Hang Seng index futures fell 1% earlier
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was at $0.9889
- The Japanese yen was at 143.20 per dollar, down 0.3%
- The offshore yuan was at 6.9791 per dollar, down 0.1%
Bonds
- The yield on 10-year Treasuries held at 3.35%
- Australia’s 10-year bond yield rose eight basis points to 3.73%
Commodities
- West Texas Intermediate crude fell 0.7% to $86.29 a barrel
- Gold was at $1,695.08 an ounce, down 0.4%
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