Asian stocks fell to their lowest level in seven weeks on Friday and the dollar held firm as investors around the world avoided riskier assets on fears that rising US interest rates and strengthening China of its zero-COVID policy will hurt growth harshly, according to Reuters.
MSCI’s broadest index of Asia-Pacific stocks outside Japan shed 2.65% on Friday and fell to its lowest level since March 16, the day Chinese Vice Premier Liu He pushed shares higher. by committing to support the markets and the economy.
The benchmark is down 3.8% from last Friday’s close, which would be its worst week since mid-March. The Japanese Nikkei bucked the trend, rising 0.56% as it returned from a three-day vacation.
Chinese blue chips lost 2%, the Hong Kong benchmark lost 3.44% and the Chinese yuan fell to an 18-month low in both onshore and offshore markets.
Dickie Wong, director of research at Hong Kong brokerage Kingston Securities, attributed the falls to Wall Street falling overnight amid worries about aggressive U.S. rate hikes, as well as fears about the health of the Chinese economy.
China will fight all comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported Thursday, after a meeting of the country’s top decision-making body.
Investors said that appeared to rule out any easing of the zero COVID policy, which is slowing Chinese economic growth and scolding global supply chains.
“The silver lining is the expectation that new Chinese tax measures may come out over the weekend,” Wong said. “It’s the only thing giving Asian markets some support at their current low valuations.”
Overnight, the Dow Jones Industrial Average and S&P 500 both fell more than 3%, and the Nasdaq Composite lost 4.99% in its biggest one-day drop since June 2020.
Things looked less dire in Europe, where regional stock futures fell 0.25% and FTSE futures lost 0.27%. US futures were flat.
“Risks remain high for a policy mistake – either because (the Fed) is not tightening fast enough to fight inflation, or by being too hawkish, leading to the end of the current economic cycle,” David Chao said. , global market strategist for ex-Japan APAC. at Invesco.
US payrolls data, due later on Friday, will help traders gauge the strength of the economy.
According to the CME’s FedWatch tool, the market is pricing an 87% chance of a monstrous 75 basis point rate hike from the Fed at its June meeting. That’s even after the Fed hiked rates 50 basis points this week and Chairman Jerome Powell ruled out a 75 basis point hike.
US yields rise on expectations of a rapid pace of rate hikes. The yield on US 10-year bonds was 3.065% after crossing 3.1% overnight for the first time since November 2018.
As investors turned to less risky assets, the dollar index was at 103.75 on Friday, after hitting a new 20-year high at 103.94 overnight, buoyed by expectations that states will raise interest rates faster than other central banks.
The dollar index is up 0.43% this week, its fifth straight week of gains.
The pound was trading around its lowest level against the dollar in almost two years after falling 2.2% on Thursday. The Bank of England raised rates by 25 basis points as expected, but two politicians expressed caution about rushing future rate hikes.
Bitcoin, one of the most risk-friendly assets, fell 8% overnight, hitting a two-and-a-half-month low. It was last trading around $36,500.
Oil prices shrugged off worries about global economic growth as worries about tighter supply supported prices ahead of the impending EU embargo on Russian oil.
Brent crude futures rose 0.6% to $111.57 a barrel. U.S. crude rose 0.64% to $108.95 a barrel.
Gold was steady at $1876.4 an ounce.