Buildings and pedestrians reflected on an electronic stock board outside a securities firm in the Shinjuku district of Tokyo, Japan, on Wednesday, 17 February 2021. (Photo: Soichiro Koriyama/Bloomberg)Shares in Hong Kong were headed to the lowest level in a decade, led by technology companies, and Chinese stocks tumbled to a six-month low. South Korea’s benchmark index fell after the central bank pivoted back to outsized interest-rate increases.
Stocks in Japan and Australia fluctuated while US futures were mixed after the S&P fell for the fifth consecutive session. The Nasdaq 100 struck a fresh two-year low.
The risk aversion bolstered the dollar and the yen weakened beyond a level that in the past has triggered intervention as investors prepare for higher US rates while the Bank of Japan sticks with ultra-easy policy settings.
Markets remain jittery after comments from Bank of England Governor Andrew Bailey, who said the BOE would end its special support of the gilts market. Bailey’s stance adds to the concerns of investors challenged by hawkish policy makers. Cleveland Federal Reserve president Loretta Mester said settings needed to tighten further to quell inflation.
US consumer price data due on Thursday that may determine if the Fed increases rates by 75 basis points in a fourth consecutive move in November.
The drop in Chinese stocks came after little support was seen from aggregate financing and new yuan loans data that both beat consensus estimates by a wide margin. The outlook for China’s economy, which is struggling with Beijing’s Covid curbs, continues to cast a shadow over markets in Asia.
Gilts trading had closed prior to Bailey’s comments. In addition to the impact on the pound, the 10-year Treasury yield on Tuesday closed at the highest level since 2010.
Oil dropped for a third day on escalating concerns that a global slowdown will hurt energy demand amid a broad shift away from risk assets.
Kristina Hooper, chief global market strategist for Invesco, said in a note that while the world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, US banks kick off the third-quarter earnings season this week with strategists bracing for weak profits against a drumbeat of warnings over the rising risk of a global recession.
Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion. BM/DM
Comments
Scroll down to load comments...