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Asian stocks fall after Dow, Nasdaq collapsed due to US Fed rate hike

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Asian stocks fell on Friday, while yields on the U.S. dollar and treasury bills rose as a result of a reversal the day before after investors expressed concern that rising interest rates could hurt global economic growth.

The market fears that the US Federal Reserve and some other major central banks will have to raise interest rates even more aggressively than planned to fight rampant inflation, which would potentially push the economy into recession.

Wage data in the U.S., to be released later Friday, will help the market assess how hot the economy is working.

The largest Asia-Pacific equity index MSCI outside of Japan on Friday morning fell 2.34% and fell 3.5% since last Friday’s close. Japanese Nikkei is back from a three-day vacation.

Overnight, the Dow Jones Industrial Average and the S&P 500 fell more than 3% on the Wall Street, while the Nasdaq Composite fell 4.99% in the biggest one-day fall since June 2020, closing at its lowest level since November 2020.

It was a reversal 24 hours earlier when Asian stocks opened higher after the S&P 500 recorded Wednesday’s biggest one-day gain in nearly two years.

“It was described in one piece of news I read this morning as ‘Big Vomit,’ which seems appropriate,” said ING Asia research chief Rob Cornell about a quick turnaround in a morning note for clients.

According to CME FedWatch, the market is estimating prices with a monster probability of 75 basis points from the Fed at its June meeting, even after the Fed raised rates by 50 basis points this week and Powell ruled out an increase of 75 basis points.

“Risks remain high due to political error – either (the Fed) is not tightening up quickly enough to fight inflation, or overly hawkish, leading to the end of the current business cycle,” said David Chao, global market strategist, ex-Japan APAC. , in Invesco.

Chao said U.S. and Asia-Pacific stocks could continue to experience “low volatility,” and U.S. profitability could continue to rise, but he expected the momentum after Omicron opened to help support U.S. growth despite normalizing Fed policies.

Yields in the US are rising due to expectations of rapid interest rates. Yields on 10-year U.S. bonds were 3.084% on Friday morning after crossing 3.1% overnight for the first time since November 2018.

The strong commitment of Chinese leaders to adhere to the strategy of zero COVID-19 has raised concerns about the health of the country’s economy, while the ongoing war in Ukraine is also damaging attitudes towards risk.

Chinese blue chips fell 2% on Friday, while the Hong Kong benchmark fell 2.44%.

The Chinese yuan, which trades offshore, fell to an 18-month low of 6.7338 per dollar.

As investors moved to less risky assets, the dollar index on Friday morning was at 103.67, reaching a new 20-year peak of 103.94 overnight, backed by expectations that the U.S. will raise interest rates faster than other central banks.

For example, sterling fell on Thursday by 2.2% against the dollar. The Bank of England, as expected, raised rates by 25 basis points, but two politicians expressed caution about rushing to raise rates in the future. Read the full story

Bitcoin, one of the riskiest assets, fell 8% overnight and hit a two-and-a-half-month low. The last time he traded was about $ 36,300.

Oil prices fell early in Asian trade as fears of an economic downturn outweighed concerns about new EU sanctions against Russia, including an embargo on crude oil.

Brent futures fell 0.5% to $ 110.3 a barrel. US oil lost 0.56% to $ 107.67 a barrel.

Gold fell 0.3% to $ 1,870.7 an ounce.

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