Hong Kong On Tuesday, the stock and bond markets tried to settle down as investors looked to inflation data and this week’s U.S. labour market report to see if the expected rises in interest rates around the world are justified.
Related: Wolf of Wall Street compares low-capitalization cryptocurrencies to penny stocks.
The Nikkei stock index in Japan rose 1.2%, aided in part by a new round of yen weakness.
Wall Street indexes declined on Monday, although the pace of selling slowed while U.S. stock futures in Asia increased by 0.3%. Futures for European equities rose, with the pan-regional Euro Stoxx 50 up 0.6% and the German DAX up 0.6%. Futures on the FTSE fell 0.26%.
In addition to interest rates, the health of China’s economy is among the top worries of investors. When it was announced that COVID-19 restrictions had been tightened in many major cities, the Shanghai Composite Index went down by 0.6%.
The Hang Seng in Hong Kong was also pulled 0.9% down as investors began to temper their optimism about an agreement between China and the United States for access to audit documents of Chinese businesses.
At the Jackson Hole conference last week, Federal Reserve Chair Jerome Powell and European Central Bank speakers took a “hawkish” tone. As a result, traders sold bonds and stocks because they thought short-term interest rates would go up.
Related: Stocks are weak, the dollar strong as rate fever strikes bonds.Â
Manishi Raychaudhuri, head of APAC stock research at BNP Paribas, stated, “For the next couple of weeks at least, the markets will be focused on the probable Fed move” (OTC:BNPQY).
“Previously, there was discussion of the Fed maybe reducing interest rates in the second half of 2023,” he added. “However, this notion has fallen by the wayside.”
“Higher for longer (interest rates) may be the story that is gaining traction.”
Futures markets estimate a more than two-thirds possibility that the ECB will hike rates by 75 basis points in September, and approximately a 70% likelihood that the Fed will do the same.
On Friday, the U.S. non-farm payrolls report is coming, and markets may dislike a good result if it supports a continuation of aggressive interest rate increases. People will be paying attention to the German inflation numbers, which will be released on Tuesday at 1200 GMT, and the Chinese manufacturing survey, which will be released on Wednesday.
The price of U.S. Treasuries stabilised on Tuesday morning. The two-year yield fell to 3.3987 percent after reaching a high of 3.48 percent on Monday, its highest level since late 2007.
Related: Asian stocks fall as Powell, a rate-hike bet enthusiast, drums up speculation.
Furthermore, benchmark 10-year yields fell to 3.0670 percent on Monday, down from 3.13 percent.The gilts are expected to see pressure when British markets reopen on Tuesday after a holiday on Monday.
Following an overnight decline, the U.S. dollar stabilised, while the euro attempted to restore parity, aided by ECB policy rate rise expectations and a decline in gas prices. [FRX/]
The dollar index, which measures the value of the dollar relative to a basket of other currencies, climbed 0.1% to 108.73, not far from the 20-year high of 109.48 it reached the day before. The currency was sold for $0.9999 per euro and 138.52 yen per dollar.
The upcoming eurozone inflation data, US employment data, and Russian gas flow restrictions later this week, according to Rodrigo Catril, a strategist at National Australia Bank (OTC: NABZY), will put pressure on the euro.
“The European narrative is all about the economic outlook… no energy implies no growth,” he added, adding that it would not be surprising if the euro fell below $0.96 again.
As traders anticipate the September 5 meeting of oil producers, the price of crude oil has mostly maintained its gains in anticipation of output reductions. U.S. crude declined 0.4% to $96.59 per barrel, while Brent crude dropped to $104.2 per barrel.
Related: As interest rates rose, investors sold U.S. stocks.
Gold’s decreased somewhat. The spot price of gold was $1,735.52 per ounce.
