Asian stocks went down, U.S. bond yields went up a little bit, and a rising dollar pushed the value of the dollar against the yen to a level not seen in 20 years. This was because investors were worried about how rate hikes would affect the economy before a European Central Bank meeting later in the day.
The cautious mood in Asia was likely to carry over to the European markets, where stock futures pointed to a down day for all stocks. Futures for the Euro Stoxx 50, the German DAX, and the FTSE as a whole were all down between 0.4% and 0.5%.
Before the ECB meeting, not much happened. At the meeting, the bank’s asset purchase programme will end, and rate hikes will be announced to fight rising inflation. Many investors stayed out of the market.
“It’s classic price action before a meeting of the central bank. At the moment, it doesn’t make much sense to guess about anything other than an hourly or intraday time frame. ” Matt Simpson, who works at City Index in Sydney as a senior market analyst, said this.
“It’s the most exciting meeting since Christine Lagarde has been in charge and since Draghi was here, saying ‘whatever it takes.'”
Even though there was a war in Ukraine, data showed that the economy of the euro zone grew much faster in the first quarter than in the previous three months. This made people worry about inflation in Europe as well.
Investors are trying to guess how much and how fast the ECB will tighten monetary policy. They are also waiting for U.S. consumer price data on Friday, which the White House says it expects to be “elevated.” A Reuters poll found that economists think inflation will be 8.3% per year.
Despite the fact that Asian stock markets have gained about 9% since reaching their lowest point in almost two years last month, investors are still concerned that tightening central bank policy to control inflation will slow the economy.
In afternoon trade, MSCI’s broadest index of Asia-Pacific shares outside of Japan was down 0.65%. Australian shares were down 1.2% and Seoul’s KOSPI was down 0.49.
The Hang Seng in Hong Kong went from making small gains to losing 0.75 percent, and Chinese A-shares lost 1 percent as new COVID-19 restrictions were put in place in parts of Shanghai.
The Chinese stock market has been doing better in the past few weeks because people think that restrictions will be loosened. The loosening of restrictions helped the country’s exports in May.
The Nikkei stock index in Japan went up by 0.04%.
Overnight, the Dow Jones Industrial Average fell 0.81 percent, the S & P 500 fell 1.08 percent, and the Nasdaq Composite fell 0.73 percent.
Analysts at ING said in a note that trading has been very low volume and in a very narrow range for the past two weeks.
They predicted that the ECB meeting and Friday’s price data in the United States would be catalysts for a more bearish outlook.
The wait for U.S. price data also hurt U.S. Treasuries. Yields went up on Wednesday after a bad auction of 10-year notes.
On Thursday, the U.S. 10-year yield went up to 3.0344 percent from 3.029 percent on Wednesday, and the two-year yield went up to 2.7887 percent from 2.774 percent on Wednesday.
The dollar was helped by rising yields, especially when compared to the yen, which fell to a 20-year low of 134.56 before gaining some ground.
Policy differences are making the yen weaker, and the Bank of Japan is one of the few central banks around the world that still has a dovish stance. [FRX/]
The global dollar index stayed the same at 102.51, and the euro stayed the same at $1.0719 before the ECB meeting.
Crude oil prices kept going up, reaching their highest level in three months. This was because people expected strong demand in the U.S. and a recovery in China after COVID-19 restrictions were eased.
Brent crude, the global benchmark, was last trading at $123.94 per barrel, up 0.29 percent on the day. The price of crude oil in the United States increased by 0.19 percent to $122.34.
Gold, which is sensitive to rate hikes but is seen as a hedge against inflation, fell. The spot price of gold fell 0.08 percent to $1,851.80 per ounce. [GOL/]
