Shares fall due to inflation risk; Easing expected in China: markets unwind
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Shares fall due to inflation risk; Easing expected in China: markets unwind

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(Bloomberg) — Equities fell in Asia as concerns about faster inflation and monetary tightening continued to damage treasury bills and US equities.

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Shares fell in Japan and South Korea, which, along with China, are among the few markets open on Friday over the Easter holidays. The tech sector led a retreat on Wall Street on Thursday, with Chinese stocks also trading in the US.

Treasury yields skyrocketed on higher US import prices and comments from Federal Reserve official John Williams that a half percentage point rate hike is a “reasonable option.” Treasury markets are closed for Good Friday. The dollar rose against all of its Group of 10 counterparts, with the yen being one of the weakest performers.

Unlike the US and many other economies, China appears to be further easing policies to help an economy hit by Covid lockdowns. The central bank is expected to cut a key rate on Friday and possibly inject more liquidity.

Oil’s biggest weekly rally this month underlined global price pressures. Crude was supported by a report that said the European Union is moving towards a phased ban on imports from Russia over the war in Ukraine.

The surge in bond yields put both gold and Bitcoin behind. The world’s largest cryptocurrency dropped to about $40,000.

The fluctuations in the bond markets remain at the center of investors’ attention, reflecting the ebb and flow of concerns about when inflation will peak and the potential economic damage of tighter monetary policy across much of the world.

“We don’t think there will be a recession,” Julian Emanuel, chief equity strategist at Evercore ISI, said in an interview on Bloomberg Television. “We don’t think the Fed is going to break the glass. But the problem is that investors don’t have that mentality yet.”

In Europe, policymakers are reaching a consensus on raising interest rates in the third quarter to tackle record inflation, according to those familiar with the matter. The first increase in borrowing costs by the European Central Bank in more than a decade is expected to be 25 basis points.

Musk, Twitter

Meanwhile, Twitter Inc. lower, impressed by billionaire Elon Musk’s offer to buy the social media giant. The company would consider taking a measure that would protect it from hostile takeover bids.

Traders at Wall Street’s largest investment banks had a better-than-expected quarter as the war in Ukraine exacerbated volatility. But questions arise about future earnings growth as fears of a recession emerge.

“Nobody ever suggested that when the Fed starts raising interest rates, the market will sell dramatically,” Quincy Krosby, chief equity strategist at Lpl Financial, told Bloomberg Television. “It doesn’t. The market can do very well. This time you have quantitative tightening, the opposite of the flow of liquidity. It makes a big difference.”

Some of the key moves in markets:

Shares

  • The S&P 500 fell 1.2% on Thursday

  • The Nasdaq 100 fell 2.3% on Thursday

  • Japan’s Topix index lost 1.3% as of 9:13 a.m. in Tokyo.

  • South Korea Kospi Index Drops 1%

currencies

  • The Bloomberg Dollar Spot Index rose 0.5% on Thursday

  • The euro fell 0.1% to $1.0816

  • The yen fell 0.3% to 126.21 per dollar

  • The offshore yuan was 6,3900 per dollar

bonds

Raw materials

  • West Texas Intermediate crude oil rose 2.6% to $106.95 a barrel on Thursday

  • Gold was $1,973.18 an ounce

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