Asia equities fall as economic forecast dims. Asian markets had their worst week in three months. Hotter-than-expected inflation and hawkish central bank surprises worried investors about the economic impact of curbing runaway prices.
MSCI’s broadest Asia-Pacific share index outside Japan (.MIAPJ0000PUS) lost 0.7% and 3.6% for the week, its worst since March. Chinese holidays lightened trade.HSI fell 1.4% after a pause.
Japan’s Nikkei (.N225) plummeted 1% as core inflation hit its sharpest pace in over four decades.
Wong Kok Hoong, head of stock sales trading at Maybank in Singapore, said risk-aversion followed stubborn British inflation data. A 2.4% weekly loss in the Nikkei ended a ten-week gaining streak.
S&P 500 futures declined 0.4% on Friday after Wall Street gained overnight.
Britain and Norway hiked 50 basis points overnight. LAST WEEK, the U.S. Federal Reserve’s hawkish stance and Australia’s and Canada’s hikes stunned markets.
Sterling briefly rose when the Bank of England raised rates to 5%, but investors worried that tightening would hurt the economy.
“The tight labour market in the U.K., given its predominately labour-intensive service-based economy, is proving increasingly problematic and exemplifies the risk in other advanced economies,” said ANZ economist Henry Russell in a note.
“Although moves in rates and foreign exchange were muted, there does seem a sense that more tightening is coming in the northern hemisphere,” he said.
Friday marked the U.S. dollar’s best week in a month. The Australian dollar, sensitive to commodities prices and Chinese GDP, slipped 0.5% to $0.6724 and more than 2% on the week.
With onshore markets closed, the offshore yuan fell to 7.2225 per dollar, a seven-month low.
Maybank’s Wong said the market was not buying week-old stimulus pledges to boost China’s stalled post-pandemic recovery. “Sentiment’s weak,” he added.
When Fed Chair Jerome Powell said more rate hikes were expected, U.S. Treasuries sold overnight. Two-year Treasury rates increased nine bps to 4.8% overnight and held at 4.7888% in Asia on Friday.
Ten-year Treasury rates jumped 7.6 bps overnight to 3.7849% Friday. Gold, which generates no revenue, fell to three-month lows at $1,910 an ounce as rates rose.
Brent crude futures declined 0.5% to $73.79, their worst week over two months.
European, British, and U.S. purchasing managers index surveys are due Friday, and British retail sales are predicted to fall.
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