Global stocks headed for their biggest weekly decline in more than three months following a spate of central bank rate hikes that have pushed up bond yields and heightened fears of recession.
European equity futures fell about 0.4% Friday, as did contracts for US benchmarks, taking little relief from Treasury Secretary Janet Yellen’s view that the risk of a US economic contraction was declining. She suggested that a slowdown in consumer spending may be the price to pay for finishing the campaign to contain inflation.
Japanese shares erased initial gains Friday and fell more than 1% as investors turned their attention to speed bumps that are likely to slow this year’s blistering rally in Tokyo.
Asia’s biggest losses were in Hong Kong, where traders played catch-up following a holiday Thursday. Friday’s decline extended the run of losses to four straight days amid concern that even if China does provide more aid for the economy, it won’t have a major impact on markets.
“They probably can’t ignite animal spirits to the same extent where stimulus will get them into high growth multipliers,” Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, said on Bloomberg Television. He expects Beijing to try to “cushion” the economy and hold growth just above 5% as investors worry about regulatory uncertainty, troubles in the property sector and geopolitical tensions. Mainland exchanges remained closed Friday.
Treasury two-year yields hovered around 4.78% and near the highest since March after Federal Reserve Chair Jerome Powell said the US may need one or two more rate increases in 2023.
Rate hikes from policymakers in England, Norway and Switzerland underscored the upward pressure on bond yields. The yields rose on Australian and and New Zealand 10-year bonds Friday.
Signs of risk aversion were also on show in currency markets, with a gauge of dollar strength rising 0.3% as commodity currencies including the Australian dollar and the Norwegian krone slumped.
The yen resumed its recent depreciation, a move that has stoked speculation that authorities in Tokyo may turn to verbal intervention. Stronger-than-expected inflation also fueled suggestions that the Bank of Japan may adjust its price forecasts or tweak its ultra-loose monetary policy.
Elsewhere, stocks linked to Adani Group declined after Bloomberg reported that US authorities opened an inquiry into the statements by the group during meetings with investors in the US.
In commodities, oil fell more than 1%, adding to a slump in excess of 4% on Thursday as worries about high interest rates rattled investors, overshadowing a drop in US crude inventories. Gold was set for its biggest weekly drop since early February.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- US S&P Global Manufacturing PMI, Friday
- Fed Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
- S&P 500 futures fell 0.4% as of 7:06 a.m. London time. The S&P 500 rose 0.4%
- Nasdaq 100 futures fell 0.4%. The Nasdaq 100 rose 1.2%
- Japan’s Topix fell 1.7%
- Australia’s S&P/ASX 200 fell 1.4%
- Hong Kong’s Hang Seng fell 1.8%
- Euro Stoxx 50 futures fell 0.4%
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.2% to $1.0929
- The Japanese yen fell 0.1% to 143.32 per dollar
- The offshore yuan fell 0.4% to 7.2233 per dollar
- The Australian dollar fell 0.8% to $0.6700
- The British pound fell 0.3% to $1.2712
- Bitcoin fell 0.4% to $30 050.9
- Ether fell 0.1% to $1,885.7
- The yield on 10-year Treasuries declined one basis point to 3.78%
- Japan’s 10-year yield fell half a basis point to 0.365%
- Australia’s 10-year yield advanced two basis points to 4.00%
- West Texas Intermediate crude fell 1.2% to $68.66 a barrel
- Spot gold was little changed
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