Asian stocks, Wall Street futures engulfed by inflation concerns amid higher oil prices: Market Wrap

Shares in Asia fell on Thursday and bonds were again on the back foot due to the impact of high inflation.

MSCI Inc. The U.S. Asia-Pacific Equity Index declined as stocks in Japan, China and Hong Kong struggled for traction. Chinese tech stocks edged lower.

US futures fell as Wall Street closed a two-day rally. Oil prices climbed above $122 a barrel, raising concerns about rising costs and monetary tightness.

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Sentiment also took a beating when Shanghai said it would shut down a district for mass COVID testing on Saturday morning. It is the city’s first major movement ban since it was pulled out of restrictions earlier this month.

Benchmark Treasury yields held above 3% and New Zealand’s 10-year yield touched its highest level in seven years. The dollar-yen pair dominates the forex markets, with weakness in Japan’s currency putting the 2002 high of 135.15 in play.

Markets remain stable on the risk of a recession posed by rising interest rates around the world to reduce price pressure.

The OECD added to the gloom with a warning that the global economy would pay a “heavy price” for Russia’s war in Ukraine in the form of weak growth, strong inflation and potentially long-lasting damage to supply chains.

“We are of the view that the likelihood of a recession by the end of 2023 is 40% or greater,” Anna Han, equity strategist at Wells Fargo Securities LLC, said on Bloomberg television. He said the US consumer-price index issued Friday could see an “upward surprise” flattening the Treasury yield curve.

ECB Rate Outlook
Meanwhile, the European Central Bank is set to kick off trillions of euros of asset purchases on Thursday for a rate hike expected in July that will set a path toward an exit from eight years of negative rates. The euro was little changed, while European equity futures retreated.

“It is likely that the ECB will have a sharp pivot today,” Carol Kong, a strategist at the Commonwealth Bank of Australia, said on Bloomberg television. “If we see Christine Lagarde leaning towards a 50 basis point increase in July, that’s going to be very supportive of the euro-dollar.”

Trade data is due later in China. Shanghai’s reopening from a two-month-long Covid lockdown could provide a temporary boost: Economists estimate exports rose 8% in May, up from 3.9% in April.

shares

• S&P 500 futures fell 0.3% as of 10:45 am in Tokyo. S&P 500 dropped 1.1%
• Nasdaq 100 futures fell 0.4%. Nasdaq 100 fell 0.8%
• Japan’s Topix Index remained flat
• Australia’s S&P ASX/200 Index drops 1.3%
• South Korea’s Kospi index dropped 0.6%
• Hong Kong’s Hang Seng Index dropped 0.1%
• China’s Shanghai Composite Index dropped 0.2%
• Euro Stokes 50 futures fell 0.6%

currencies

• Bloomberg Dollar Spot Index up 0.1%
• Euro $1.0712 . was on
• The Japanese yen was at 134.27 per dollar
• offshore yuan 6.7029 per dollar. was on

bond

• Yield on 10-year Treasury rose two basis points to 3.05%
• Australia’s 10-year yield rose four basis points to 3.59%

Goods

• West Texas Intermediate crude was up 0.3% at $122.50 a barrel
• Gold was at $1,852.68 an ounce