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Recession Fears Sink Oil and May Sap Asian Stocks: Markets Wrap


(Bloomberg) — Stocks in Asia are set to come under pressure Wednesday after fears of an economic downturn tightened their grip on financial markets, sinking oil and spurring rallies in the dollar and Treasuries.

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(Bloomberg) — Stocks in Asia are set to come under pressure Wednesday after fears of an economic downturn tightened their grip on financial markets, sinking oil and spurring rallies in the dollar and Treasuries.

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Futures pointed to falls for bourses in Japan, Australia and Hong Kong. US contracts fluctuated after a volatile Wall Street session left stocks higher but with little conviction that global shares are closer to escaping a bear market.

The prevailing worries about recession amid a campaign of monetary tightening to fight high inflation spurred a plunge in oil to under $100 a barrel. Crude was just above that level in early Asian trading. Copper hit a 19-month low.

Demand for havens bolstered Treasuries and pushed a dollar gauge to the highest level in more than two years. There’s growing talk of the greenback reaching parity with the euro.

Slivers of comfort such as the possible rowing back of some US tariffs on Chinese goods are proving no match for the dour mood in markets. A looming energy crisis in Europe amid Russia’s war in Ukraine and threats to company earnings as the US economy slows are among the risks investors face.

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“Markets are caught between two opposing forces and that’s the place we are going to be in for the next few months,” Diana Amoa, chief investment officer for long-biased strategies at Kirkoswald Asset Management, said on Bloomberg Television. “We go from trading lower growth to trading high inflation.”

The odds of a US recession in the next year are now 38%, according to latest forecasts from Bloomberg Economics. Bond traders are now penciling in a policy turnaround by the Federal Reserve in the coming year, with current hawkishness giving way to interest-rate cuts in the middle of 2023.

Elsewhere, the pound held losses sparked by turmoil in British politics. Boris Johnson’s premiership is on the brink after the resignation of two of the most senior Cabinet members, but he’s digging in as UK prime minister.

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In China, Shanghai launched mass testing for Covid in nine districts after detecting cases the past two days, fueling concerns that the financial hub may once again find itself locked down in pursuit of Covid Zero.

Bitcoin versus Ether? Stablecoins versus central bank digital currencies? What are NFTs really? What is the next shoe to drop in the crypto washout and where will the next bubble inflate? Click here to participate in this week’s MLIV Pulse survey, which takes only one minute and is anonymous.

What to watch this week:

  • FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday
  • EIA crude oil inventory report, Thursday
  • Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
  • ECB account of its June policy meeting, Thursday
  • US employment report for June, Friday

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Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 7:18 a.m. in Tokyo. The S&P 500 rose 0.2%
  • Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 1.7%
  • Nikkei 225 futures dropped 0.6%
  • Australia’s S&P/ASX 200 futures slid 1%
  • Hang Seng futures weakened 0.3%

Currencies

  • The Bloomberg Dollar Spot Index rose 1%
  • The euro was at $1.0270
  • The Japanese yen was at 135.77 per dollar
  • The offshore yuan was at 6.7107 per dollar

Bonds

  • The yield on 10-year Treasuries declined seven basis points to 2.81%

Commodities

  • West Texas Intermediate crude rose 1.1% to $100.58 a barrel
  • Gold was at $1,767.31 an ounce

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