Shares are falling due to new inflation, China is worried about COVID

By Kevin Buckland

TOKYO (Reuters) – Asian equities plummeted on Monday and bond yields rose as inflation rallied back on concerns about even more aggressive US interest rate hikes, while new ones Massive tests of COVID-19 in China have raised concerns about more crippling blockades.

Rising expectations for Federal Reserve rate hikes brought the Japanese yen to a two-decade low against the dollar, prompting more concern from authorities about strong downward movements. .

MSCI’s Asia-Pacific Equity Benchmark Index fell 2.66%.

Weakness in shares was expected to extend into the US and European negotiations, with futures pointing to a 1.67% drop for the, a 1.4% decline and a drop in the 0.77%.

“It’s becoming a Black Monday in Asia,” Jeffrey Halley, a senior market analyst at OANDA, wrote in a customer note.

“The word R (is) now on everyone’s lips” in the midst of “a struggle to revalue the Fed’s hiking expectations,” he wrote.

In Asia, attention has been focused on the risk of new COVID-19 blockades with Beijing’s most populous district, Chaoyang, which announced three rounds of mass testing to quell a “ferocious” outbreak of COVID-19 arise in a bar.

Shanghai conducted massive tests to contain a jump in cases linked to a hairdresser.

Chinese chips fell 1.42% and Hong Kong chips fell 3.29%.

it fell 3.03% and the South Korean Kospi fell 3.27%. Australian markets were closed for holidays.

“Anyone trying to pick the bottom line on China’s growth and stock markets on the basis that China was‘ one and done ’with the blockades is naive,” Halanda of OANDA said.

China’s growth stocks fell, and Hong Kong-listed technology giants fell 4.45%. The heavyweights of the Alibaba Index (NYSE :), Tencent and Meituan fell between 4% and 6%.

INFLATION CONCERN

In foreign exchange markets, the dollar rose to 135.22 yen, its highest level since October 1998, driven by a rise in Treasury yields that continued in Tokyo trade.

The 10 years reached a maximum of more than a month of 3.202%, which places it only one tenth of the base point of the highest since November 2018.

This led to upward pressure on Japanese government bond yields, with a 10-year high reaching a six-year high of 0.255%, half a basis point above the 0.25% tolerance limit. of the Bank of Japan under its yield curve control policy. Even amid the BOJ’s permanent offer to buy unlimited amounts of the 10-year note from April.

The breach of its ceiling prompted the central bank to announce an additional unscheduled purchase transaction.

The U.S. consumer price index rose 8.6 percent more than expected last month, the biggest year-over-year increase since December 1981, data showed Friday.

This shattered hopes that inflation would peak and instead alerted markets that the Fed could tighten policy for too long and cause a sharp economic slowdown. The next political decision will be on Wednesday.

“Inflation data is changing the game, forcing the Fed to shift to a higher gear, tightening front-loading policy,” Jefferies strategist Aneta Markowska wrote in a research note, raising a call for decision this week to rise by 75 basis points.

Markets currently have an 80% probability of a half point increase and a 20% probability of a 75 basis point.

Two-year Treasury yields, which are very sensitive to political expectations, jumped to 3.194% in Tokyo on Monday, the first since December 2007.

The currency, which measures the currency against six major peers, including the yen, rose to 104.58 for the first time in almost a month.

The euro fell to $ 1.04755 for the first time since May 19.

Bitcoin, the leading cryptocurrency, fell to its lowest level since December 2020 at $ 24,888.88.

Meanwhile, it fell, with a $ 1.81% or 1.48% drop in futures, to $ 120.20 a barrel and US West Texas Intermediate crude to $ 118.81 a barrel, a $ 1.86 drop, or 1.54%.