Asian Stocks Fall as Yields Surge With Rate Hikes: Markets Wrap

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(Bloomberg) — Asian stocks headed for a sixth weekly decline following another day of losses for US shares and surging Treasury yields that underscore expectations for tighter monetary policy and a slowing global economy.

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Equities opened lower in Australia and South Korea while Hong Kong futures pointed downward. US contracts inched higher after the S&P 500 closed at the lowest level since June. The 10-year yield soared 18 basis points to pierce 3.7% on Thursday, its highest in a decade.

Japan is closed for a holiday Friday and there is no trading of cash Treasuries in Asian hours. Sovereign bond yields leaped more than 20 basis points in Australia.

A dollar gauge held near a record high after a day of dramatic moves in currency markets that saw Japan intervene to prop up the ailing yen for the first time since 1998.

The intervention hasn’t addressed the underlying cause of yen weakness — the yawning gap between Japan’s ultra-loose monetary policy and rising rates in other countries — leaving the currency vulnerable.

Rate hikes overnight in the UK, Switzerland and Norway, along with increases Thursday in Asia in the Philippines, Indonesia and Taiwan, look set to damp market sentiment in the region.

The Federal Reserve has given its clearest signal yet that it’s willing to tolerate a recession as the necessary trade-off for regaining control of inflation, with officials forecasting a further 1.25 percentage points of tightening before year-end.

“We see this new even-higher-for-longer rate path as associated with a substantially greater higher likelihood of a hard landing, and so not just unambiguously hawkish but unambiguously bad for risk,” said Krishna Guha, vice chairman of Evercore ISI.

The environment isn’t suitable for strong directional positioning on overall indexes, according to Mark Haefele at UBS Global Wealth Management. However, he advises against retreating to the sidelines, “especially given the drag on cash from high inflation and the challenge of timing a return to markets without missing out on rebounds.”

“Instead, we stay invested but also selective, and focus our preferences on the themes of defensives, income, value, diversification, and security,” he added.

Oil clung to a slight gain Friday and gold fluctuated. Bitcoin pushed higher, extending gains to a second day, while remaining below $20,000.

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Here are some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 9:25 a.m. in Tokyo. The S&P 500 fell 0.8%

  • Nasdaq 100 futures gained 0.2%. The Nasdaq 100 dropped 1.2%

  • South Korea’s Kospi index lost 0.7%

  • Australia’s S&P/ASX 200 Index slipped 1.1%

  • Hong Kong’s Hang Seng futures dropped 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was steady at $0.9838

  • The Japanese yen traded at 142.27 per dollar

  • The offshore yuan was at 7.08329 versus the dollar

Bonds

Commodities

  • West Texas Intermediate crude increased 0.3% to $83.75 a barrel

  • Gold climbed 0.1% to $1,672.84 an ounce

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