Asia stock market clims, US Treasuries fall amid global markets bounce back; Goldman cuts growth outlook

Japan and Hong Kong paced regional equity gains, while US and European futures were little changed, providing some relief from this year’s stock market rout. The dollar hovered near a two-year high.

Asia stock market, Wall Street
The 10-year US yield climbed to about 2.93%. (File: Reuters)

Stocks in Asia climbed Monday and Treasuries slipped amid a steadier mood in global markets following a bounce in Wall Street shares.

Japan and Hong Kong paced regional equity gains, while US and European futures were little changed, providing some relief from this year’s stock market rout. The dollar hovered near a two-year high.

Sentiment may be getting a boost from China, which effectively cut the interest rate for new mortgages over the weekend, seeking to bolster an ailing housing market. The rate on one-year policy loans was left unchanged on Monday.

Covid lockdowns are squeezing economic activity in China. Shanghai partially loosened curbs by announcing a phased reopening of shops.

In the bond market, a key question is whether economic worries will help stem 2022’s Treasury selloff, which has been driven by inflation and tightening US monetary settings. The 10-year US yield climbed to about 2.93%

Cryptocurrencies were relatively calm compared with last week’s rout. Bitcoin held a weekend advance to trade near $31,000.

The risk of an economic downturn amid high inflation and rising borrowing costs remains the major worry for markets, alongside Russia’s war in Ukraine and China’s Covid outbreak. Many traders remain wary of calling a bottom for equities despite a 17% drop in global shares this year.

“There is a belief we could feasibly see a short-term calming before another leg lower with a greater degree of panic involved,” Chris Weston, head of research at Pepperstone Group, said in a note.

Goldman Sachs Group Inc. Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.”

The firm’s economists cut their forecasts for US growth this year and next — they now expect the economy to expand 2.4% this year and 1.6% in 2023, down from 2.6% and 2.2% previously.

Wheat
Food and fuel prices are feeding into rising costs. A move by India to restrict wheat exports saw its price jump by the exchange limit, illustrating how tight global supplies are. Oil held around $110 a barrel.

Geopolitical concerns in Europe related to the Russia-Ukraine war are likely to remain in the spotlight. Finland and Sweden moved toward joining the North Atlantic Treaty Organization, potentially amplifying tensions.

“The markets are being defined as volatile, fragile and to some extent unstable,” with bonds again looking like a haven asset adding to an “interesting mix,” Mahjabeen Zaman, Citigroup senior investment specialist, said on Bloomberg Television.

What to watch this week:

  • China retail sales, industrial production, jobless, property sales, liquidity operations. Monday
  • New York Fed President John Williams speaks Monday
  • Fed Chair Jerome Powell among slate of Fed speakers. Tuesday
  • Reserve Bank of Australia releases minutes of its May policy meeting. Tuesday
  • G-7 finance ministers and central bankers meeting. Wednesday
  • Eurozone, UK CPI. Wednesday
  • Philadelphia Fed President Patrick Harker speaks. Wednesday
  • China loan prime rates. Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.1% as of 10:50 a.m. in Tokyo. The S&P 500 rose 2.4% Friday
  • Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 3.7% Friday
  • Japan’s Topix index rose 0.5%
  • Australia’s S&P/ASX 200 index rose 0.6%
  • South Korea’s Kospi index rose 0.2%
  • Hong Kong’s Hang Seng Index rose 0.6%
  • China’s Shanghai Composite Index rose 0.1%

Currencies

  • The Bloomberg Dollar Spot Index was steady
  • The euro was at $1.0402, down 0.1%
  • The Japanese yen was at 129.14 per dollar
  • The offshore yuan was at 6.7975 per dollar

Bonds

  • The yield on 10-year Treasuries advanced one basis point to 2.93%
  • Australia’s 10-year bond yield fell two basis point to 3.38%

Commodities

  • West Texas Intermediate crude fell 0.7% to $109.66 a barrel
  • Gold was at $1,815.56 an ounce, up 0.2%

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