Bloomberg – Stocks in Asia settled on Friday as investors weighed the resilience of the global economic recovery against risks from the US Federal Reserve’s tightening of monetary policy and Russia’s military campaign in Ukraine.
Stocks in Japan, Australia and South Korea moved in relatively narrow ranges. US futures fell slightly After technology stocks helped the S&P 500 index close at its highest level in more than six weeks.
US Treasuries pared some of the declines they posted on Thursday. The 10-year yield was still close to levels last seen in 2019. Oil fell, although WTI remained above $110 a barrel.
Investors continue to grapple with the fallout from the Russian invasion, including rising commodity costs and volatility Expectations of higher inflation and sharper interest rate increases by the Federal Reserve.
The divergence between the Fed and the still dovish Bank of Japan has weakened the yen, which is near a six-year low against the dollar. Albert Edwards, a strategist at Societe Generale, said a weak yen could lead to a depreciation of the yuan.
Global stocks are set to post their first consecutive weekly gain in 2022, which It indicates that equity investors are expecting long-lasting economic growth after conflict, high inflation and the Fed’s crackdown on price pressures.
But key parts of the US Treasury yield curve continue to stabilize or invert. This is generating Debate over whether the bond market indicates a sharp economic slowdown or even a recession in the future.
The Fed’s moves to contain inflation are “what ultimately will lead to a more aggressive inversion of the curve, which we believe will happen fairly quickly,” Jane Tanuzzo, global head of fixed income at Columbia Threadneedle Investments, said in a statement.
He added that this does not necessarily indicate a recession, because “this is a completely different cycle and the first in more than 30 years where the Fed has been trying to catch up with inflation.”
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The latest data from the United States showed that government jobless claims fell last week to their lowest level since 1969, while a measure of business activity advanced to an eight-month high in early March.
Chicago Fed President Charles Evans said Thursday that he feels “Comfortable” with raising rates in quarter-point increments, while “open” to a move of 50 basis points if needed. The US central bank raised its benchmark interest rate by a quarter point last week, the first increase since 2018.
The two-year Treasury yield is on track for its biggest quarterly gain since 1984, an example of recent heavy losses in the bond markets.
While price action in Treasuries has been brutal, that doesn’t mean the decades-old bond bull market is over, Carly Garner, founder of DeCarley Trading, said on Bloomberg TV.
“Inflation is the story now, but inflation tends to be something that can change very quickly,” he said. “It rises and then quickly and quickly reverses in the other direction and generally stagnates while we’re at it.”
Meanwhile, President Joe Biden’s administration is increasingly concerned that Russian President Vladimir Putin may be critical of his military campaign struggles and the far-reaching sanctions imposed on him. The United States and its allies have warned Putin not to use biological, chemical or nuclear weapons.
Some of the main movements in the markets:
- S&P 500 futures were down 0.2% at 9:27 am in Tokyo. The S&P 500 rose 1.4%.
- Nasdaq 100 futures lost 0.3%. The Nasdaq 100 is up 2.2%.
- Japan’s Topix index was little changed
- Australia’s S&P/ASX 200 Index is up 0.3%.
- Kospi index stabilized in South Korea
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