Stocks slide, dollar climbs as rate hike concern in focus

div classBodysc17zpet90 cdBBJodivpBy Tom Westbrookp

pSINGAPORE Reuters – Asian stocks fell the most in two weeks on Monday as concern about rapid U.S. rate rises and slowing growth rattled investors, while the euro found support after Emmanuel Macron won a second term as French president.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pMSCIs broadest index of AsiaPacific shares outside Japan slid 1.6 to a sixweek low, and a nudge from authorities extended steep losses for the Chinese yuan. [CNY] p

pJapan‘s Nikkei fell 1.9. Hong Kong’s Hang Seng fell 3. S&P 500 futures dropped 0.8 while FTSE futures and European futures were off by more than 1. Oil fell 2.7. [OR]p

pThe euro was broadly steady at 1.0802, compared with broad dollar gains elsewhere, and it touched an almost twomonth high against a struggling sterling.p

pMacron comfortably saw off a farright challenge, reassuring markets about Frances commitment to an integrated Europe, even if his economic platform now depends on parliamentary elections in June.p

p“The absence of a change of course will reassure not only the other European Union countries but also the NATO,” said Vincent Mortier, chief investment officer of Amundi, Europes largest fund manager.p

pThe news was small relief, though, for broader worry about a global backdrop of high inflation and likely rate rises that have been pounding bond markets for months – exacerbated by war in Ukraine and disruption from coronavirusrelated lockdowns in China.p

pU.S. shares had tumbled at the end of last week after Federal Reserve Chairman Jerome Powell said a 50basispoint rate hike was on the table at Mays meeting and St. Louis Fed President James Bullard floated the idea of 75 bp hikes.p

“Concerns around rates and recession are now the biggest risks for investors” with a particular focus on demand, said Candace Browning, head of global research at Bank of America. p

“Spiking food and gasoline prices plus the end of key stimulus programs has investors concerned about the lowincome consumers ability to spend.”

The Treasury market steadied, keeping the benchmark 10year yield at 2.8581 and the twoyear yield off last weeks highs at 2.6399.

YUAN SLIDES

Harsh restrictions in China have also begun to spread to Beijing, where more than a dozen buildings have been locked down, as concern grows about the economic damage of the shutdown of Shanghai.

Chinas bluechip CSI 300 index fell to its lowest since June 2020 and investors have so far been underwhelmed by policy support for the flagging economy.

The middle of Chinas onshore currency trading band was fixed at its lowest level in eight months on Monday, seen as an official nod for the yuans recent slide and it was quickly sold to a oneyear low of 6.5225 per dollar.p

The dollar was also on the march elsewhere though trade was thinned a bit by public holidays in Australia and New Zealand. The Aussie slid 0.8 to a sixweek low of 0.7185 and the kiwi fell 0.4 to a twomonth low of 0.6603.p

Sterling, buffeted by weak retail sales figures last week, slipped 0.3 to an 18month low of 1.2792. [GBP]p

Brent crude futures dropped 2.7 to a twoweek low of 103.88 a barrel. U.S. crude futures fell 2.6 to 99.38 a barrel.

Copper and iron ore fell in Asia, though soybean oil jumped after an Indonesian ban on palm oil export.

The week ahead is headlined by U.S. growth data due on Thursday, European inflation figures due on Friday and a monetary policy meeting for the Bank of Japan.p

Investors expect U.S. growth to steady around 1.1, far slower than the COVID19 reboundjuiced figures of the recent past, but probably robust enough to bear rate rises.p

The BOJ meeting will also be closely watched for any adjustments to economic projections or any signs of a policy response to the yen, which has tumbled more than 10 in two months.p

Bitcoin held on just above resistance at 40,000.

Reporting by Tom Westbrook Editing by Muralikumar Anantharaman

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