Asia Stocks Slide as Traders Eye Higher Rates Path: Markets Wrap

(Bloomberg) — Equities in Asia fell Monday after heavy selling on Wall Street late last week as investors ratcheted up forecasts for US interest rates following hot inflation data.

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Shares in Australia and Japan edged lower while futures contracts for Hong Kong shares also dropped. US equity futures were flat after the S&P 500 and Nasdaq 100 declined more than 1% Friday, dragging the two US indexes each to their worst week since December. The Nasdaq Golden Dragon index of Chinese companies fell 3.9% Friday in another sign of likely selling pressure in Asia Monday.

The retreat from risk assets was triggered by an unexpected acceleration of the personal consumption expenditures price index, the Federal Reserve’s favored inflation gauge, which prompted a swift repricing of interest rate forecasts. Market pricing now reflects US rates to peak at 5.4% this year, compared to a expectations held just a month ago of rates to peak at less than 5%.

“It seems premature to call a turnaround in risk this week,” Chris Weston, head of research for Pepperstone Group Ltd., in a Monday note. “The clouds of uncertainty remain with us – the market’s consensus view that inflation would head lower through the year has clearly been challenged.”

Yield on the 10-year Treasury dipped by two basis points early on Monday after a jump of seven basis points Friday. Elevated yields continued to support the dollar, with a gauge of greenback steady on Monday after rising 0.7% Friday.

The Australian 10-year yield rose seven basis points in Monday trading while the New Zealand 10-year yield climbed two basis points and was near the highest level since November.

The yen inched higher against the dollar after a sharp fall on Friday. Bank of Japan Governor nominee Kazuo Ueda will speak again in the Japanese parliament Monday. Inflation data released last week showed prices in the nation were rising at the fastest pace in four decades, placing pressure on the central bank to reassess its loose policy settings.

Data due later in the day will provided extra context for the global economic outlook. Eurozone economic and consumer confidence is due, along with durable goods data from the the US.

On the geopolitical front, the US will impose a 200% tariff on all imports of Russian-made aluminum, as well as aluminum products made with metal smelted or cast in the country, in a move that could ripple through global manufacturing supply chains.

Late last week, Treasury Secretary Janet Yellen warned China and other nations against providing material support to Russia, saying any such actions would amount to an evasion of sanctions and would “provoke very serious consequences.”

Key events this week:

Eurozone economic confidence, consumer confidence, Monday
US durable goods, Monday
US wholesale inventories, Conf. Board consumer confidence, Tuesday
China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Wednesday
Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday
US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
Eurozone CPI, unemployment, Thursday
US initial jobless claims, Thursday
Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 9:12 a.m. Tokyo time
Nasdaq 100 futures rose 0.2%
Hang Seng futures fell 1.3%
Japan’s Topix fell 0.2%
Australia’s S&P/ASX 200 fell 1.3%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0549
The Japanese yen rose 0.1% to 136.33 per dollar
The offshore yuan was little changed at 6.9808 per dollar
The Australian dollar was little changed at $0.6728

Cryptocurrencies

Bitcoin fell 0.2% to $23,502.98
Ether fell 0.2% to $1,638.45

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Akshay Chinchalkar.