Asian stocks slide as Fed hike fears tip Wall St into bear market

HONG KONG, June 14 (Reuters) – Asian stocks fell sharply and the safe-haven dollar held near a two-decade high on Tuesday after Wall Street took a confirmed bear market leg on fears that higher aggressive US interest rates will push the world’s largest economy into recession.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 0.45% in volatile trade, recouping some of its earlier losses.

Australia’s benchmark S&P/ASX200 (.AXJO) closed down 3.55% while Japan’s Nikkei stock index (.N225) fell 1.32%, after falling 2% earlier in the session.

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The negative tone in Asia followed a dismal US session on Monday, which saw Goldman Sachs forecast a 75 basis point interest rate hike at the Federal Reserve’s next policy meeting on Wednesday. Read more

However, investors appeared to be shaking off the gloom ahead of European trade with pan-regional Euro Stoxx 50 futures up 0.83%, German DAX futures up 0.9% and futures FTSE up 0.62%. US stock futures also added 1.17%.

“While there is clearly a risk of a significant policy tightening, it remains unlikely that there will be a full-fledged recession, with the unemployment rate jumping by two percentage points or more,” he said. said Stephen Koukoulas, managing director of the Canberra-based market. Economy.

“On the contrary, growth is certain to slow – which is the objective of the policy tightening – and by the end of this year, inflationary pressures should start to ease.”

In Hong Kong, the Hang Seng Index (.HSI) pared earlier losses to rise 0.26% after trading in negative territory for most of the day. China’s CSI300 index (.CSI300) retraced some of its lost ground at 0.23%.

Expectations for aggressive U.S. rate hikes rose after inflation in the year to May soared 8.6%, more than expected.

“The US market is the biggest in the world, so when it catches a cold, so does the rest of the world,” said Clara Cheong, global market strategist at JP Morgan Asset Management.

“There will be short-term volatility in Asia, but we believe that in the medium to long term in Asia ex-Japan, earnings forecasts have already been lowered, so the outlook is relatively better here than in other parts of the world.”

Cheong said China’s monetary easing and reopening of ASEAN economies following COVID-19 shutdowns could shield the region from some financial market fallout.

On Wall Street overnight, fears of a US recession sent the S&P 500 (.SPX) down 3.88%, while the Nasdaq Composite (.IXIC) lost 4.68%. The Dow Jones Industrial Average (.DJI) fell 2.8%.

The benchmark S&P 500 is now down more than 20% from its most recent closing high, confirming a bear market, by a commonly used definition.

Benchmark 10-year Treasury yields hit their highest level since 2011 on Monday and a key part of the yield curve inverted for the first time since April as investors braced for the prospect that attempts to the Fed to stem soaring inflation would hurt the economy.

The yield on the benchmark 10-year Treasuries rose to 3.3466% from its US close of 3.371% on Monday. The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, touched 3.3804% from a US close of 3.281%.

In currency markets, the dollar index, which tracks the greenback against a basket of major currencies, was at 104.98, just off a two-decade high of 105.29 hit on Monday. Read more

Against the Japanese yen, the US currency was at 134.59, just below its recent high of 135.17.

Europe’s single currency rose 0.2% to $1.0432, after losing 2.8% in a month.

Bitcoin fell around 4.5% on Tuesday to $21,416, a new 18-month low, extending Monday’s 15% drop as markets were rocked by crypto lender Celsius suspending withdrawals. Read more

Oil markets began to rally late in the Asian session with U.S. crude up 0.13% at $121.08 a barrel, after trading lower for most of Tuesday. Brent crude firmed slightly to $122.42 a barrel.

Gold shrugged off a weaker start, with the spot price gaining 0.42% to $1,826.65 an ounce.

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Reporting by Scott Murdoch in Hong Kong; Additional reporting by Alun John; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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