(Bloomberg) — Asian stocks and currencies tumbled on concerns that US interest rates may stay higher for longer and signs that China’s growth recovery is stalling.
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MSCI’s Asia Pacific Index dropped the most in three months as shares from Hong Kong to Japan and South Korea slumped. Futures contracts for US and European stocks steadied in Asian trading after the S&P 500 erased earlier gains and fell more than 1% in a volatile session.
A slew of China’s economic indicators showed that the nation’s economic rebound remains patchy. While both gross domestic product and fixed assets investment beat forecasts, data on retail sales and industrial output fell short of estimates. The impact spilled over the region’s currencies, with a gauge of emerging-markets currencies falling to fresh lows for the year.
“China data appears to be strong on the headline, but the details are weak,” said Charu Chanana, head of foreign-exchange strategy at Saxo Markets in Singapore. “This would suggest that the economy needs more support, and markets will continue to position for a weak yuan.”
The Indonesian rupiah weakened past 16,000 per dollar for the first time since 2020, prompting the nation’s central bank to intervene in the currency market. The South Korean won dropped to its lowest since 2022.
The offshore yuan held morning losses as officials unexpectedly weakened its defense as a resurgent dollar and poor sentiment pushed it toward a policy red line.
Treasuries steadied Tuesday after bond yields jumped to new year-to-date highs on stronger-than-expected retail sales data. Oil gained as Israel vowed to respond to an unprecedented attack by Iran, keeping tensions elevated in the Middle East.
Elsewhere, the Japanese yen remained under pressure, after surging to a new 34-year low against the dollar overnight. The increasing risk that authorities in Tokyo may intervene in the market to stem the drop still lingers, after Japan’s finance minister warned that he’s ready to take all available measures in the foreign exchange market if needed.
Fear Gauge
Volatility perked up, with the premium for one-month put options to protect against a pullback in US equities hitting the highest since October. Wall Street’s “fear gauge” — the VIX — hit levels unseen this year. The S&P 500 broke below 5,100, dropping to the lowest in almost two months. The tech-heavy Nasdaq 100 slid over 1.5%. Both gauges breached their 50-day moving averages — seen as a bearish signal by several chartists. Banks outperformed on a surprise profit from Goldman Sachs Group Inc.
Treasury 10-year yields spiked on Monday, while those on two-year notes came close to 5%. Bonds were also under pressure as JPMorgan Chase & Co. and Wells Fargo & Co. tapped the US high-grade bond market, the first in a likely parade of bond sales from banks after results.
US retail sales rose by more than forecast in March and the prior month was revised higher, showcasing resilient consumer demand that keeps fueling a surprisingly strong economy. As long as a robust labor market supports household demand, there’s a risk that inflation will become entrenched.
In commodities, West Texas Intermediate advanced in Asia after reclaiming its $85 mark on Monday. Top Israeli military officials reiterated the country has no choice but to answer Iran’s weekend attack. Gold was steady in early trading.
Key events this week:
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Germany ZEW survey expectations, Tuesday
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US housing starts, industrial production, Tuesday
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Morgan Stanley, Bank of America earnings, Tuesday.
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Fed Vice Chair Philip Jefferson speaks, Tuesday
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BOE Governor Andrew Bailey speaks, Tuesday
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IMF publishes its latest world economic outlook, Tuesday
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Eurozone CPI, Wednesday
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Fed issues its Beige Book, Wednesday
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Cleveland Fed President Loretta Mester speaks, Wednesday
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Fed Governor Michelle Bowman speaks, Wednesday
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BOE Governor Andrew Bailey speaks, Wednesday
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Taiwan Semiconductor earnings, Thursday
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US Conf. Board leading index, existing home sales, initial jobless claims, Thursday
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Fed Governor Michelle Bowman speaks, Thursday
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New York Fed President John Williams speaks, Thursday
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Atlanta Fed President Raphael Bostic speaks, Thursday
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BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 11:57 a.m. Tokyo time
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Japan’s Topix fell 1.8%
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Australia’s S&P/ASX 200 fell 1.9%
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Hong Kong’s Hang Seng fell 1.4%
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The Shanghai Composite fell 1.3%
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Euro Stoxx 50 futures fell 1.2%
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Nasdaq 100 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.1% to $1.0610
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The Japanese yen was little changed at 154.31 per dollar
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The offshore yuan fell 0.2% to 7.2726 per dollar
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The Australian dollar fell 0.4% to $0.6417
Cryptocurrencies
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Bitcoin rose 0.4% to $63,387.55
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Ether rose 0.3% to $3,093.29
Bonds
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The yield on 10-year Treasuries was little changed at 4.61%
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Japan’s 10-year yield advanced one basis point to 0.865%
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Australia’s 10-year yield advanced five basis points to 4.31%
Commodities
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West Texas Intermediate crude rose 0.9% to $86.14 a barrel
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Spot gold rose 0.2% to $2,387.19 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Zhu Lin.
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