© Reuters. FILE PHOTO: People walk past a screen showing the Hang Seng stock index outside the Hong Kong Stock Exchange, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik
By Tom Westbrook
SINGAPORE (Reuters) – Stocks struggled to gain on Wednesday, the dollar nursed losses and bonds clung to gains as signs of a slowdown in the US job market made investors nervous about the economic outlook, while a larger-than-expected rate hike lifted the dollar.
Asian trade dipped on holidays in Hong Kong and China, leaving the MSCI Asia-Pacific Index excluding Japan performing little better than flat as it fell 1.6% and headed lower. largest one-day percentage drop since mid-March.
Futures indicated that European markets were poised for a broadly lower open, with Eurostoxx 50 futures falling 0.26% and German futures 0.12%. however, futures were up 0.04%.
A four-day winning streak for Wall Street indices ended overnight, with all three major indices falling, and interest rate expectations lowered after data showed US job openings. The US hit its lowest level in almost two years in February.
Two-year Treasury yields, which closely track near-term rate expectations, plunged nearly 15 basis points and the dollar continued to hit two-month lows.(US/)(FRX/ )
“The odds of a market recession have increased,” Jamie Dimon, chief executive of America’s largest bank, JPMorgan Chase & Co (NYSE:), said in a letter to shareholders, warning that confidence fears have shaken the banks have not changed. dissipated.
“The current crisis is not over yet,” he said. “And even when it’s behind us, there will be repercussions for years to come.”
US interest rate futures have rallied sharply in recent weeks as traders reckon that under pressure banks will tighten lending anyway and save the need for policymakers to Monetary do the job.
The latest futures prices imply a higher probability than the Fed is done raising rates and more than 60bp in rate cuts this year.
Two-year yields are at 3.864% and 10-year yields are at 3.352%, with the entire US yield curve below the top of the fed funds rate window, which is at 5%. .
Gold, which pays no yield, hit a one-year high above $2,000 an ounce overnight. Last time it rose 0.2% to $2,023.27 an ounce. The United States gained 0.16% to $2,025.40 an ounce.
“Maybe the Fed will make one more (hike), but the probability distribution around the policy rate is heavily skewed to the downside,” said John Briggs, head of economics and market strategy at NatWest Markets.
“We don’t think this is something that is going to change in market prices any time soon.”
SQUEEZED DOLLAR
Outside the US, markets are seeing other central banks stay on course to hike to rein in inflation. A Reuters poll of FX strategists found that most expect that to keep pressure on the dollar this year.
The Reserve Bank of New Zealand surprised traders with a 50 basis point rise on Wednesday that sent the kiwi rising 1% in one leg to hit a two-month high, in contrast to Australia’s central bank, which halted its rises on Tuesday.
Elsewhere, investors are anticipating a few more rate hikes in Europe, where German exports have turned surprisingly strong. The euro was steady at $1.0952, just below the two-month high it hit overnight against the dollar at $1.0973. The kiwi was up 0.60% at $0.635.
China and Asia in general are the great hopes for growth.
Japanese data on Wednesday showed service activity grew at its fastest pace in more than nine years in March, though factory output remained weak.
China’s expanding manufacturing sector lost momentum in March, data showed earlier in the week, though investment inflows hit a record for the first quarter on optimism from abroad that political support for companies is to come. .
Commodity markets are settling down after oil prices surged on Monday on news of surprise OPEC+ production cuts. it rose 0.4% to $81.03 a barrel, from $85.31, up 0.44% on the day. (EITHER)
