International Finance: Asia stocks set to fall with focus on rates path: markets wrap

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Asian stocks were poised to follow Wall Street lower on Monday as the Federal Reserve’s resolve to keep raising rates and a wave of Covid in Beijing damped sentiment for riskier assets.

, boosted by a report that the Japanese prime minister may consider allowing more flexibility in the monetary regime that has kept the nation’s interest rates at rock-bottom levels.

Australian shares opened lower while equity futures for Japan and Hong Kong fell after the S&P 500 and the tech-heavy Nasdaq 100 closed lower for a third day on Friday. The quarterly triple witching expiration of equity derivatives amplified market moves. The risk of higher interest rates pushing the US into recession in 2023 is casting a pall over trading that’s winding down into year end. Meanwhile, China’s pivot from Covid Zero raises the prospect of growth from economic reopening — along with the risk from a surge of new infections. The number ofarriving at Beijing’s funeral parlours and crematoriums is increasing, according to media reports.

Government bond yields were little changed in Australia and New Zealand on Monday after US Treasuries were mixed on Friday, when short-term bonds rallied while the 10-year maturity fell. The policy-sensitive two-year Treasury yield ended the week 17 basis points lower than where it started. Investors had cheered the softer-than-expected US inflation data but that euphoria faded as Fed officials hammered home the message that rates would go higher for longer until they’re confident inflation has been subdued. A wave of rate hikes and hawkish outlooks from central banks across the globe, including the European Central Bank, further bruised sentiment last week.

 

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