© Reuters. File: Taipei Jan 22, 2008 A man looks at stock market monitors. REUTERS/Nicky Loh/File photo
By Kevin Buckland
TOKYO (Reuters) – Asian equities tumbled and bond yields rose on Monday, with red-hot inflation raising concerns about a sharper rise in U.S. interest rates, while a mass retest of COVID-19 in China raised concerns of more lockdowns.
High expectations of a rate hike from the Federal Reserve sent the Japanese yen to a two-decade low against the dollar, raising concerns among policymakers about sudden moves.
MSCI’s Asia-Pacific benchmark stock index fell 2.66%.
Weakness in equities is expected to expand into US and European trade, indicating a 1.67% decline, a 1.4% decline and a 0.77% decline going forward.
“It is becoming a Black Monday in Asia,” Jeffrey Haley, senior market analyst at OFDA, wrote in a note to a client.
“The R word is (now) on everyone’s lips in the midst of a struggle to reassess the Fed’s bullish expectations,” he wrote.
Focusing on the new risk of COVID-19 lockdown in Asia, Beijing’s most populous district, Chaoyang, has announced three rounds of mass testing to prevent a “serious” outbreak of COVID-19 from appearing in a bar.
Shanghai carried out a mass test to control the presence of heels in cases linked to a hairdressing salon.
Chinese blue chips fell 1.42% and Hong Kong 3.29%.
3.03% and the South Korean Kospi fell 3.27%. Australian markets have closed for the holidays.
“Anyone trying to get the bottom line on China’s growth and equity markets based on the fact that China is ‘one and the same’ in lockdowns is naive,” said OANDA’s Haley.
China growth stocks tumbled 4.45% in Hong Kong-listed tech giants. heavy weight index alibaba (NYSE :), Tencent and Meituan are down 4% to 6% each.
Concerns about inflation
In currency markets, the dollar rose to 135.22 yen, the highest level since October 1998, due to the Treasury’s continued gains in Tokyo trading.
It hit a 10-year one-month high of 3.202%, holding just a tenth of the highest basis point since November 2018.
That put pressure on Japanese government bond yields, pushing the six-year 10-year high to 0.255%, which was just above the Bank of Japan’s 0.25% tolerance limit under its yield curve policy. Even in the midst of the BOJ’s standard offer to buy an unlimited amount of the 10-year note starting in April.
The breach of its ceiling prompted the central bank to announce additional unplanned purchase actions.
The US Consumer Price Index rose 8.6% last month, the biggest annual increase since December 1981, data showed on Friday.
That dashed hopes that inflation would peak and instead warned markets that the central bank would tighten policy for a long time and cause a sharp recession. The next policy decision is Wednesday.
“The decisive inflation data is forcing the Federal Reserve to shift into a higher gear, preloading policy austerity,” Jefferies strategist Aneta Markovska wrote in a research note, calling for a 75% increase. points over the weekend.
Markets are currently trading at 80% for a half-point increase and 20% to 75 basis points.
Two-year Treasury yields, more sensitive to policy expectations, rose to 3.194% in Tokyo on Monday for the first time since December 2007.
Measuring the currency against six key allies, including the yen, The rose to 104.58 for the first time in nearly a month.
The euro fell to $1.04755 for the first time since May 19.
Leading cryptocurrency Bitcoin has dropped to $24,888.88 since December 2020.
Meanwhile, crude oil was down $1.81 or 1.48% to $120.20 a barrel and US West Texas Intermediate crude was down $1.86 or 1.54% to $1.54 a barrel. 118.81 a barrel.