(Bloomberg) -- Asian stocks dropped on Friday in the wake of another plunge on Wall Street as the prospect of higher interest rates and turmoil in Europe stoked fears of global recession.
Shares fell in Japan, Australia and South Korea after the S&P 500 slid more than 2% to the lowest since November 2020. An MSCI Asia-Pacific equity gauge was on course for its seventh straight weekly loss, the longest streak since September 2015.
Chinese shares gave up early gains ahead of a week-long holiday and after factory activity showed mild growth. US Treasury yields were little changed after days of being whipsawed on the back of a debt crisis gripping the UK.
The Cboe Volatility Index has been well over 30 for almost all of this week, reflecting heightened worry among equity investors. Another group of Federal Reserve officials struck a hawkish tone, German inflation topped 10% and the UK government’s tax plan continued to weigh on market sentiment.
The Bank of Japan boosted its planned bond purchases at a regular operation on Friday as it sought to cap upward pressure on yields. The benchmark 10-year rate sits just below the upper limit of the BOJ tolerance band.
The pound extended gains into a fourth day following a report that Prime Minister Liz Truss will meet the country’s fiscal watchdog, potentially leading to measures that may ease concern over this week’s tax-cut plans.
The onshore yuan is set to end a miserable month and things could get even worse for its less-regulated offshore exchange rate as markets in mainland China close for holidays next week. Beijing will not be able to guide investor expectations with its daily reference rate for the offshore yuan, worsening the drama.
“Our assumption is that the Chinese government will continue to fight this administratively as long as they can before they have to step in with direct intervention and have to start selling down US reserves,” Charlene Chu, senior analyst for Autonomous Research, said on Bloomberg Television.
Amid the economic pressure, China’s central government shifted to allow some cities to lower their mortgage rates for first home purchases in its latest bid to help the country’s struggling housing market.
The tech-heavy Nasdaq 100 dropped nearly 4% during the session after St. Louis Fed President James Bullard said investors have now understood that they can’t escape additional rate hikes in coming months. The index was dragged down by Apple Inc., which fell after a rare analyst downgrade from Bank of America warning of weaker consumer demand for its popular devices.
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Key events this week:
- China PMI, Friday
- Euro zone CPI, unemployment, Friday
- US consumer income , University of Michigan consumer sentiment, Friday
- Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 10:55 a.m. Tokyo time. The S&P 500 fell 2.1%
- Nasdaq 100 futures climbed 0.2%. The Nasdaq 100 fell 2.9%
- Japan’s Topix index fell 1.2%
- South Korea’s Kospi index slid 0.2%
- Hong Kong’s Hang Seng Index was flat
- China’s Shanghai Composite Index fluctuated
- Australia’s S&P/ASX 200 Index dropped 0.4%
- Euro Stoxx 50 futures gained 0.3%
Currencies
- The Bloomberg Dollar Spot Index slipped 0.1%
- The euro rose 0.1% to $0.9823
- The Japanese yen decreased 0.1% to 144.59 per dollar
- The offshore yuan fell 0.2% to 7.1114 per dollar
Bonds
- The yield on 10-year Treasuries dropped one basis point to 3.78%
- Australia’s 10-year bond yield was at 3.94%
Commodities
- West Texas Intermediate crude climbed 0.4% to $81.56 a barrel
- Spot gold rose 0.2% to $1,663.15 an ounce