(Bloomberg) — Stocks in Asia and U.S. and European futures extended a global selloff Thursday as the rout in technology shares and bonds accelerated after the Federal Reserve signaled interest-rate hikes may be more aggressive than many had expected.
An MSCI Inc. index of the region’s equities retreated for the third day in four with a gauge of tech shares among the worst performing. Treasury yields headed higher, with the 10-year yield at the highest since March as traders increased bets U.S. rates will rise at least three times this year.
The Nasdaq 100 tumbled the most since March Wednesday as rising yields added to concerns over growth and profitability. The S&P 500 also retreated. Overnight swaps markets moved to price in an 80% chance of a 25 basis-point hike at the Fed’s meeting in March. The dollar and yen climbed as safe havens caught a bid.
A selloff in Chinese tech companies worsened on concerns firms will pare holdings amid Beijing’s regulatory crackdown on the sector. The Hang Seng Tech Index fell for a fourth day.
Investors fear tightening monetary policy will choke global growth and crimp company profits just as the omicron Covid variant leads to fresh curbs. Fed officials said a strengthening economy and higher inflation could lead to earlier and faster rate increases than expected, with some also favoring moves to shrink the balance sheet soon after.
“We are prepping people for volatility,” Carol Schleif, BMO Family Office deputy chief investment officer said on Bloomberg Television. “You had another record double-digit year and yet investors’ mood is pretty dour. We definitely think the readjustment of the volatility will increase this year because there is a lot to be dealt with.”
‘Inflation Nervous’
The next focal point will be U.S. December jobs numbers on Friday as investors position for a policy normalization from the Fed.
“Markets have been inflation nervous all week as the reality of the Fed taper peeps over the horizon,” Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, said in a note. “What the price action this week tells us all is what I’ve been saying for a while, the start of monetary normalization will make price movements a lot more ‘honest’ than the past 18 months.”
Meanwhile, restrictions are coming back in some places in the face of omicron. Hong Kong reimposed social curbs and halted flights from eight countries. Tokyo raised the alert level after reporting almost 400 new cases in one day. China brought in new restrictions for people traveling from the U.S. as cases there climb.
“Financial markets face a year of discovery as we find out what ‘normal’ rates of growth and inflation look like as well as how economic policy responds after two years dominated by the effects of the pandemic,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note.
More geopolitical ructions emerged. Russia and its allies said they would send troops to back Kazakhstan’s president amid protests. Russia is already at the heart of a simmering conflict regarding Ukraine.
Elsewhere, Bitcoin tumbled to around $43,000, the lowest since its early-December weekend flash crash. Other cryptocurrencies also declined. Oil fell for the first time in four days.
The Philippine peso and Indonesia’s rupiah were among the wrost-performing Asian currencies. The Korean won slipped to the lowest since July 2020.
What to watch this week:
- Fed’s Bullard discusses the U.S. economy and monetary policy in an event on Thursday
- Fed’s Daly discusses monetary policy on a panel Friday
- ECB’s Schnabel speaks on a panel Saturday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 7:09 a.m. in London. The S&P 500 fell 1.9%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 3.1%
- Topix index fell 2.1%
- Australia’s S&P/ASX 200 Index fell 2.7%
- Kospi index lost 1.1%
- Hang Seng Index fell 0.1%
- Shanghai Composite Index dropped 0.3%
- Euro Stoxx 50 futures dropped 1.9%
Currencies
- The Japanese yen was at 115.91 per dollar, up 0.2%
- The offshore yuan was at 6.3823 per dollar
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was at $1.1291
Bonds
- The yield on 10-year Treasuries rose two basis points to 1.73%
- Australia’s 10-year bond yield rose eight basis points to 1.87%
Commodities
- West Texas Intermediate crude fell 0.7% to $77.34 a barrel
- Gold was at $1,802.34
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