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Asian stocks slide, test of time for UK bonds According to Reuters



© Reuters. FILE PHOTO: A man holds an umbrella that is shadowed as he walks in front of an electric screen showing the exchange rate of the Japanese yen against the US dollar and the Nikkei stock average in Tokyo, Japan April 14 July 2022 REUTERS / Issei Kato

By Wayne Cole

SYDNEY (Reuters) – Asian stock markets tumbled on Monday after another plunge for Wall Street as investors braced for further tightening of global financial conditions, with all recession risks.

Concerns about financial stability added to the corrosion as all eyes turned to UK bonds as the Bank of England’s (BoE) emergency purchase ended.

Prime Minister Liz Truss’ decision to fire finance minister may help reassure investors, but her own fate remains unclear with media reports, Tory lawmakers will try replace her this week.

BoE Governor Andrew Bailey warned over the weekend that interest rates may have to rise more than they thought just a few months ago.

“The BoE is making emergency bond purchases technically similar to QE, while angering policy rate hikes on the other side,” said analysts at ANZ. in a note.

“Monday’s market action will provide a test, not only for the survival of Truss’ low-tax vision, but also for her political future.”

The British pound was quoted as up 0.6% at $1.1233, but trading was sparse with little liquidity in Asia. Futures futures fell 0.5% and EUROSTOXX 50 futures fell 0.6%.

MSCI’s broadest index of Asia-Pacific shares outside of Japan fell 1.2% and returned to a 2-1/2-year low last week.

1.5% and South Korea 0.1%. China’s blue-chips fell 0.6% ahead of GDP data due on Tuesday.

gained 0.5% after Friday’s sharp drop, while Nasdaq futures gained 0.4%.

While the S&P is down 25% from its peak, BofA economist Jared Woodard warns the slide isn’t over yet as the world transitions from two decades of 2% inflation to an inflation-like moment. distribute 5%.

He wrote in a Note.

“Rotating among 60/40 proxies and buying what’s scarce – electricity, food, energy – is the best way for investors to diversify.”

INTERVENTION WATCH

A sizzling U.S. consumer price report and rising inflation expectations leave markets fully expecting the Federal Reserve to raise interest rates by 75 basis points next month, and potentially the same. December.

A host of Fed policymakers will speak this week, so there will be plenty of room for hawkish headlines. Earnings season also continues with reports from Tesla (NASDAQ:) Inc, Netflix (NASDAQ:) and Johnson & Johnson (NYSE:), among others.

In China, the Communist Party Congress is expected to hand President Xi Jinping a third term, while there could be a reshuffle of top economic roles led by incumbents approaching the age of majority. retire or expire.

In the currency market, the dollar remained king as investors priced at US rates peaking around 5%.

The yen has been hit particularly hard as the Bank of Japan followed its super-easy policy, while authorities limited their intervention last week even as the dollar soared past 148.00 to a 32-year high.

Early Monday, the dollar was up at 148.59 yen and towards the next target of 150.00.

The euro is holding at $0.9745, after having a more steady run last week, while dropping a little to 113.20.

A rise in the dollar and global bond yields is a drag on gold, which is stuck at $1,650 an ounce. [GOL/]

Oil prices are trying to recover, after falling more than 6% last week as fears of a demand slowdown overtook OPEC’s planned output cuts. [O/R]

rose 64 cents to $92.27 a barrel, while up 57 cents to $86.18 a barrel.



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