An MSCI Inc. gauge of the region’s stocks was on track for its fourth consecutive weekly decline, weighed by losses in Japan, China and Hong Kong where a technology gauge slumped more than 6%.
Equities in Asia fell Friday as the fastest U.S. inflation in 40 years drove Treasury yields higher and raised expectations for steeper interest-rate hikes.
An MSCI Inc. gauge of the region’s stocks was on track for its fourth consecutive weekly decline, weighed by losses in Japan, China and Hong Kong where a technology gauge slumped more than 6%. Chinese stocks listed in the U.S. had their worst day since 2008 as traders were whiplashed by renewed regulatory concerns.
U.S. futures turned lower, suggesting caution remains after a selloff Thursday as the war in Ukraine showed no sign of easing. European contracts also slid. Oil’s spectacular rally eased and crude is set for the biggest weekly loss since November.
The prospect of a widening interest rate differential dragged the yen to a five-year low against the dollar. Money-market traders ratcheted up positioning for higher rates this year to close to seven quarter-point moves. Treasuries pared an overnight decline that took the 10-year yield briefly above 2%.
This latest evidence of inflationary pressure snapped fledgling rallies across global markets as hopes of progress in talks between Russia and Ukraine faded. The data compounded investors’ concerns about the risks to the global economy from the conflict-driven surge in commodity markets over the past couple of weeks.
“We’ve been reducing risk quite aggressively in our balanced pfs and are now sitting ina v high level of cash,” James Leung, head of APAC multi-asset at Barings Asset Management, said on Bloomberg Television. “We’ll be waiting to redeploy our cash as and when we see an opporutnity, something like further talks on a ceasefire.”
Biggest Risk
Though oil prices have retreated, signs of broader price gains have raised the potential for more-aggressive action from the Federal Reserve. The Fed is expected to lift interest rates off zero next Wednesday.
“The biggest risk is inflation,” said Fiona Cincotta, senior market analyst at City Index. “Even though central banks will try and rush to get through as much tightening as possible in the first half of the year, I think looking further out, they’re going to struggle if growth really starts to take a hit.”
The European Central Bank unexpectedly accelerated its wind-down of monetary stimulus, signaling it’s more concerned about record inflation than weaker economic growth.
Meanwhile, more firms are turning their back on Russia in response to the invasion of Ukraine. JPMorgan Chase & Co. joined Goldman Sachs Group Inc. in pulling back from Russia.