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Stocks Poised to Fall in Asia on Fed Rates Outlook: Markets Wrap

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(Bloomberg) — Asian stocks are set to follow US shares lower after Federal Reserve officials damped optimism the central bank’s tightening cycle may be nearing its peak.

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Equity futures for Japan and Hong Kong fell as declines for the S&P 500 and tech-heavy Nasdaq 100 wiped out gains from the previous session. Australia’s market opened slightly higher and US futures edged up.

Benchmark 10-year government bond yields in Australia and New Zealand fell, following Treasuries. A rally in long-dated US government debt inverted a closely watched section of the yield curve by the biggest margin in four decades, underscoring investor concern about the risk of recession.

The moves followed the biggest increase in eight months for US retail sales, outpacing estimates and indicating Fed tightening has further to run to stymie inflation. San Francisco Fed President Mary Daly said a pause in rate hikes was “off the table,” and New York Fed President John Williams said the central bank should avoid incorporating financial stability risks into its considerations.

Goldman Sachs Group Inc. increased its forecast for peak US interest rates to 5.25% at the top of the range, up from the previous call 5%.

“Every time equity and bond markets are thinking the Fed is done and start taking off in a rally, the Fed gets out and starts talking that back down again,” Cheryl Smith, economist and portfolio manager for Trillium Asset Management, said on Bloomberg Television.

The dollar steadied following a volatile day in currency markets after a missile struck Poland, a NATO member. Polish officials said was it was the result of Ukraine’s missile defense system rather than Russia, calming sentiment.

Elsewhere, European Central Bank policy makers may slow down their tempo of rate hikes, with only a 50 basis-point increase next month, according to people with knowledge of the matter.

Key events this week:

  • Eurozone CPI, Thursday

  • US housing starts, initial jobless claims, Thursday

  • Fed’s Neel Kashkari, Loretta Mester speak, Thursday

  • US Conference Board leading index, existing home sales, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 8:12 a.m. in Tokyo. The S&P 500 fell 0.8%

  • Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 1.5%

  • Nikkei 225 futures fell 0.3%

  • Australia’s S&P/ASX 200 Index rose 0.2%

  • Hang Seng Index futures fell 1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0398

  • The Japanese yen was little changed at 139.40 per dollar

  • The offshore yuan was little changed at 7.1062 per dollar

Cryptocurrencies

  • Bitcoin rose 0.8% to $16,660.32

  • Ether rose 0.6% to $1,213.51

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rheaa Rao.

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©2022 Bloomberg L.P.



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