Asian stocks slide as Fed fears push Wall Street into a bear market

HONG KONG (Reuters) – Asian shares fell sharply on Tuesday after Wall Street hit a definite turning point in a bear market and Treasury yields hit their highest levels in more than a decade on concerns that big interest rate hikes could push the world’s largest economy into recession.

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) Extended losses to go down 1.54%.

Australian Stock S&P / ASX200 (.AXJO) It lost 4.6%, while the Japanese Nikkei index lost (.N225) It decreased by 2%.

In Hong Kong, the Hang Seng Index (.HSI) China’s CSI300 Index is down 0.91% (.CSI300) It fell 1.9% to double its previous losses.

The negative tone in Asia came on the heels of the gloomy US session on Monday, which saw Goldman Sachs forecast a 75 basis point interest rate hike at the Fed’s next monetary policy meeting on Wednesday. Read more

“The US will see interest rates rise faster and higher than Wall Street predicted,” James Rosenberg, a Sydney-based advisor to Ord Minute, told Reuters. “It is likely that there will be a dual effect of lowering earnings expectations and further cutting earnings.”

Expectations of a US interest rate hike rose after inflation in the year to May jumped more-than-expected by 8.6%.

“The US market is the largest in the world, so when it catches a cold the rest of the world does too,” said Clara Cheung, global market strategist, JPMorgan Asset Management.

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

Cheung said the monetary easing of China and the reopening of ASEAN countries from the COVID-19 lockdown may protect the region from some financial market repercussions.

On Wall Street Overnight, Fears of a US Recession Pushed the S&P 500 Index (.SPX) The Nasdaq is down 3.88%. (nineteenth) He lost 4.68%. Dow Jones Industrial Average (.DJI) It fell 2.8%.

The benchmark S&P 500 is now down more than 20% from its record closing high, confirming the existence of a bear market, according to a commonly used definition.

Benchmark 10-year Treasury yields hit their highest since 2011 on Monday and a major part of the yield curve inverted for the first time since April, as investors braced for the possibility that the Federal Reserve’s attempts to stem high inflation will weigh on the economy.

The yield on the benchmark 10-year Treasury rose to 3.3466% compared to its US close of 3.371% on Monday. The 2-year yield rose as traders expected the Fed funds rate to rise, and it touched 3.3804% compared to the US close at 3.281%.

“Rising inflation, slower growth and higher interest rates are a detrimental combination for financial assets,” ANZ strategists wrote on Tuesday.

The dollar slipped 0.06 percent against the yen to 134.32, but was still close to a more than two-decade high of 135.17 hit on Monday.

The European single currency settled at $1.0407, after losing 3.04% in one month, while the dollar index, which measures the US currency against a basket of major currencies, rose at 105.19.

Bitcoin fell about 4.5% on Tuesday to $21,416, a new 18-month low, extending Monday’s 15% drop, as markets were shaken by the suspension of withdrawals by a cryptocurrency lender. Read more

US crude fell 0.13 percent to $120.77 a barrel. Brent crude fell to $122.08 a barrel.

Gold shrugged off a weaker start with spot up 0.42% to $1,826.23 an ounce.

Additional reporting by Scott Murdoch in Hong Kong; Additional reporting by Elon John. Editing by Sam Holmes

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