Global stocks set for weekly drop; China rebounds: markets wrap

Global stocks headed for a weekly loss amid fears that Federal Reserve interest-rate hikes may trigger a widespread recession.

US futures fluctuated in Asian trading after the S&P 500 saw its fourth straight decline. A rebound in Chinese equities amid reopening bets and a surge in Hong Kong-listed technology companies helped offset the broader weakness.

The MSCI World Index was on track to end the week down more than 3%. Japanese shares fell Friday as investors played catchup after Thursday’s holiday.

Treasuries held moves from the US session that saw a key segment of the yield curve reach new extremes of inversion, touching a level not seen since the 1980s when the Fed was aggressively tightening. Such curve inversions have a track record of preceding economic downturns, which is adding to market jitters before US jobs data later Friday.

Swaps that reference future Fed meetings indicate an expected peak rate above 5.18% around mid-2023.

“That pivot is obviously going to happen,” Steve Brice, chief investment officer of wealth management at Standard Chartered Bank, said of Fed policy. “But we’re probably still some way from them actually moving from a tightening bias to an easing bias. We’re going to have to just live with that tightening policy for a while longer,” he said on Bloomberg Television.

Apple Inc. shares tumbled over 4% and Amazon.com Inc. suffered its longest slide since 2019 as tech dragged on the US market. In corporate news, Moderna Inc. earnings offered a preview into the future of Covid-19 vaccine sales, and so far it doesn’t look pretty. Qualcomm Inc., the biggest maker of smartphone processors, gave a weaker forecast than expected.

Stock gauges in Hong Kong and the mainland were resilient in the face of news that Tiger Global Management, a long-time investor in China, decided to pull back from the region and pause future stock investments.

The Hang Seng Tech Index was set to recover all of its losses from last week when President Xi Jinping’s move to stack his leadership ranks with loyalists triggered a selloff. News of a joint venture between Tencent Holdings Ltd. and China Unicom buoyed sentiment and investors continued to look for signs that the nation will exit its Covid-Zero policy as well. The yuan rose.

“What we are guessing is China in the future will model the reopening on the back of Hong Kong,” Jack Siu, Greater China chief investment officer at Credit Suisse, said on Bloomberg Television. “To fully reopen, we are still at least nine months away from today.”

The dollar declined. In government bond markets, Australian yields fell.

Elsewhere, oil edged higher as investors weighed a tightening outlook for energy supply against persistent concerns over a global economic slowdown. Gold climbed.

Some of the main moves in markets:

Stocks

  • S&P 500 futures were unchanged as of 12:15 p.m. in Tokyo. The S&P 500 fell 1.1% Thursday
  • Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 2%
  • Japan’s Topix index fell 1.4%
  • South Korea’s Kospi index rose 0.1%
  • Hong Kong’s Hang Seng Index rose 5%
  • China’s Shanghai Composite Index rose 1.9%
  • Australia’s S&P/ASX 200 Index rose 0.4%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.2% to $0.9772
  • The Japanese yen rose 0.2% to 148.09 per dollar
  • The offshore yuan rose 0.6% to 7.2900 per dollar

Cryptocurrencies

  • Bitcoin rose 0.2% to $20,295.72
  • Ether fell 0.2% to $1,538.62

Bonds

  • The yield on 10-year Treasuries was little changed at 4.15%
  • Australia’s 10-year yield declined six basis points to 3.86%

Commodities

  • West Texas Intermediate crude rose 0.9% to $88.93 a barrel
  • Spot gold rose 0.6% to $1 638.86 an ounce
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