Stocks in Asia look vulnerable to declines on Thursday as a hawkish drumbeat from central banks reverberates across markets, supporting the dollar and pushing up Treasury yields.
(Bloomberg) — Stocks in Asia look vulnerable to declines on Thursday as a hawkish drumbeat from central banks reverberates across markets, supporting the dollar and pushing up Treasury yields.
Futures pointed to drops in Japan, Australia and Hong Kong when trading begins, while S&P 500 and Nasdaq 100 contracts retreated early in Asia.
US shares sealed their worst month since June, reflecting fears of slowing economic growth alongside restrictive monetary policy to curb inflation.
Treasuries slid, lifting the 10-year yield toward 3.20%, while short-dated real yields hit multiyear highs. The dollar was firm and the euro held gains on expectations of a bigger euro-area rate hike to cool record price pressures.
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.
Stock markets are entering a month that historically has been poor for returns after an August of losses across major asset classes. That poses more risks for an already fizzling bounce in global shares from June lows as the Fed pushes back against expectations of tempered rate hikes. Global bonds, meanwhile, are sliding toward the first bear market in a generation.
“It’s not that we necessarily need to get to lower lows” in stocks, Steven Wieting, chief investment strategist at Citigroup Private Bank, said on Bloomberg Television. But the “idea that we could already move forward and price in the recovery, that was the strained part” given that monetary policy is still tightening, he said.
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, traders will be 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.
The WeChat operator last year began disclosing plans to sell shares in investees such as e-commerce giant JD.com Inc. and Southeast Asia’s Sea Ltd. That in turn spurred speculation it would soon consider paring stakes in other firms such as Meituan and Pinduoduo Inc.
Here are some key events to watch this week:
- ECB Governing Council members due to speak at event Tuesday through Sept. 2
- China Caixin manufacturing PMI, Thursday
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday. Winner announced Sept. 5
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Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 7:50 a.m. in Tokyo. The S&P 500 fell 0.8%
- Nasdaq 100 futures fell 0.6%. The Nasdaq 100 fell 0.6%
- Nikkei 225 futures lost 0.7%
- Australia’s S&P/ASX 200 Index futures dropped 1%
- Hang Seng Index futures fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.0049
- The Japanese yen was at 139.08 per dollar, down 0.1%
- The offshore yuan was at 6.9065 per dollar
Bonds
- The yield on 10-year Treasuries advanced nine basis points to 3.19%
- Australia’s 10-year yield increased seven basis points to 3.67%
Commodities
- West Texas Intermediate crude fell 0.5% to $89.12 a barrel
- Gold was at $1,710.46 an ounce
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