(Bloomberg) -- Equities extended their decline in Asia while the dollar rose against major currencies including the yen as investors weighed the of risk of recession and tighter monetary policy.
Shares in Hong Kong were headed to the lowest level in a decade, led by technology companies, and Chinese stocks tumbled to a six-month low. South Korea’s benchmark index fell after the central bank pivoted back to outsized interest-rate increases.
Stocks in Japan and Australia fluctuated while US futures were mixed after the S&P fell for the fifth consecutive session. The Nasdaq 100 struck a fresh two-year low.
The risk aversion bolstered the dollar and the yen weakened beyond a level that in the past has triggered intervention as investors prepare for higher US rates while the Bank of Japan sticks with ultra-easy policy settings.
Markets remain jittery after comments from Bank of England Governor Andrew Bailey, who said the BOE would end its special support of the gilts market. Bailey’s stance adds to the concerns of investors challenged by hawkish policy makers. Cleveland Federal Reserve President Loretta Mester said settings needed to tighten further to quell inflation.
US consumer price data due Thursday that may determine if the Fed increases rates by 75 basis points in a fourth consecutive move in November.
The drop in Chinese stocks came after little support was seen from aggregate financing and new yuan loans data that both beat consensus estimates by a wide margin. The outlook for China’s economy, which is struggling with Beijing’s Covid curbs, continues to cast a shadow over markets in Asia.
Gilts trading had closed prior to Bailey’s comments. In addition to the impact on the pound, the 10-year Treasury yield on Tuesday closed at the highest level since 2010.
Oil dropped for a third day on escalating concerns that a global slowdown will hurt energy demand amid a broad shift away from risk assets.
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, US banks kick off the third-quarter earnings season this week with strategists are bracing for weak profits against a drumbeat of warnings over the rising risk of a global recession.
Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 10:52 a.m. Tokyo time. The S&P 500 fell 0.7%
- Futures on the Nasdaq 100 rose 0.2%. The Nasdaq 100 fell 1.2%
- The Topix Index was little changed
- The S&P ASX Index was flat
- The Hang Seng Index fell 1.5%
- The Shanghai Composite Index fell 0.6%
- Euro Stoxx 50 futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $0.9687
- The Japanese yen fell 0.3% to 146.30 per dollar
- The offshore yuan fell 0.2% to 7.1843 per dollar
- The British pound fell 0.2% to $1.0951
Cryptocurrencies
- Bitcoin rose 0.2% to $19,066.29
- Ether rose 0.1% to $1,283.2
Bonds
- The yield on 10-year Treasuries was little changed at 3.95%
- Australia’s 10-year yield declined four basis points to 4.00%
Commodities
- West Texas Intermediate crude fell 0.9% to $88.56 a barrel
- Spot gold fell 0.2% to $1,663.76 an ounce