©Reuters. Employees of foreign exchange trading company Gaitame.com work in front of a monitor showing the exchange rate of the Japanese yen against the US dollar, the euro and Nikkei stock averages at their trading room in Tokyo, Japan, June 22, 2022. REUTERS/Issei Kato
by Sam Byford
TOKYO (Reuters) – Asian stocks slid in volatile trading on Wednesday, unable to continue Wall Street’s rally as ongoing worries over interest rates and inflation remained a focus of investors, while the Japanese yen rose against the dollar. hit a 24-year low.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan fell 1% but was still up 1.39% to hit a five-week low on Monday. Tokyo gave up an early lead and stayed flat.
Investors continue to assess their concern that central banks are pushing the global economy into recession while trying to quell scorching inflation with interest rate hikes.
The main US stock benchmark rose 2% overnight on the possibility that the economic outlook may not have been so bleak during last week’s trading as it reported its biggest weekly percentage drop since March 2020.
“I think this recent post-holiday bear market rally reflects the uncertainty investors have about whether or not we’ve seen the peak of inflation and the Fed’s dovish stance – I think we’re getting close,” said Invesco Global Market strategist. Asia Pacific David Chao.
“While I suspect global equity markets could end the year higher from where they are today, it’s possible that continued market volatility is expected until it becomes clear that the Fed will allow the US economy to contract. I will not force myself to lower persistent inflation.”
In a sign that Wall Street may not be able to repeat Tuesday’s rally, both the S&P 500 and futures fell more than 0.5%.
Chinese blue chips fell 0.4%, Hong Kong 0.9% and Korea 1.78%.
Federal Reserve Chair Jerome Powell is expected to begin his testimony before Congress today, with investors looking for more clues as to whether another 75 basis point hike is on the cards at the July Fed meeting.
Most other global central banks are in a similar position, with the exception of the Bank of Japan, which last week vowed to maintain its ultra-low interest rate policy.
The gap between lower interest rates in Japan and rising US rates is weighing heavily on the yen, which hit a 24-year low of 136.71 per dollar in early trade before consolidating at 136.18.
Minutes of the Bank of Japan’s April monetary policy meeting, released on Wednesday, show the central bank’s concerns about the impact on the country’s business environment.
Other currency moves were more muted on Wednesday, moving against six peers, a touch stronger at 104.6.
The benchmark 10-year US Treasury yield was fairly stable at 3.2674.
Oil prices fell as U.S. President Joe Biden expected on Wednesday to call for a temporary suspension of the 18.4-cent-gallon federal tax on gasoline, a source with knowledge of the plan told Reuters. [O/R]
fell 2.1% to $112.27 a barrel while it fell 2.21% to $108.09.
It traded 0.21% lower at $1828.70 an ounce.
It continued to trade around $20,640 after falling to a low of $17,592 last week.