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Asian stocks are slipping as the Fed’s fears of a rise tip Wall St to the bear market

HONG KONG, June 14 (Reuters) – Asian stocks fell sharply and the safe haven dollar stayed near a two-decade high on Tuesday after Wall Street reached a confirmed bear market milestone due to fears that aggressive US rate hikes would push the world’s largest economy into recession.

MSCI̵[ads1]7;s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 0.45% in volatile trading, some of its past losses.

Australia’s benchmark S & P / ASX200 (.AXJO) closed 3.55% lower while Japan’s Nikkei stock index (.N225) was down 1.32%, after falling as much as 2% earlier in the session.

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The negative tone in Asia followed a gloomy US session on Monday, with Goldman Sachs predicting a 75 basis point rate hike at the Federal Reserve’s next board meeting on Wednesday. read more

However, investors seemed to shake off the gloom on their way into European trading with the Euro Stoxx 50 futures up 0.83%, German DAX futures 0.9% higher and FTSE futures rising 0.62%. US stock futures also increased by 1.17%.

“While there is clearly a risk of a significant policy tightening, it is still unlikely that there will be a full-blown recession, with the unemployment rate jumping by two or more percentage points,” said Stephen Koukoulas, CEO of Canberra-based the market. Economy.

“Rather, it is certain that growth will slow down – which is the goal of the policy tightening – and late this year inflationary pressures should begin to ease.”

In Hong Kong, the Hang Seng Index (.HSI) reduced previous losses to 0.26% after trading in negative territory most of the day. China’s CSI300 Index (.CSI300) regained some of the lost ground to be 0.23%.

Expectations of aggressive US interest rate increases have increased after inflation in the year to May shot up by 8.6 per cent more than estimated.

“The US market is the largest in the world, so when it catches a cold, so does the rest of the world,” said Clara Cheong, global marketing strategist at JP Morgan Asset Management.

“There will be short-term volatility in Asia, but we believe in the medium to longer term in Asia ex-Japan, revenue expectations have already been downgraded, so there are relatively brighter prospects here than in other parts of the world.”

Cheong said China’s monetary easing and the reopening of ASEAN economies from covid-19 shutdowns could shield the region from some of the financial markets.

On Wall Street overnight, fears of a US recession lowered the S&P 500 (.SPX) to 3.88%, while the Nasdaq Composite (.IXIC) lost 4.68%. The Dow Jones Industrial Average (.DJI) fell 2.8%.

The S&P 500 benchmark index is now down more than 20% from its recent record high, confirming a bear market, according to a common definition.

Reference rates on 10-year government bonds reached their highest level since 2011 on Monday, and a significant part of the yield curve reversed for the first time since April as investors prepared for the prospect that the Fed’s attempt to curb rising inflation would stop the economy.

The benchmark index for 10-year government bonds rose to 3.3466% compared to the US close of 3.371% on Monday. The two-year yield, which is rising with traders’ expectations of higher Fed fund yields, reached 3.3804% compared to a US close of 3.281%.

In the foreign exchange markets, the dollar index, which follows the dollar against a basket of major currencies, was 104.98, close to a two-decade high of 105.29 on Monday. read more

Against the Japanese yen, the US currency was at 134.59, just below the most recent high of 135.17.

The European single currency rose 0.2% to $ 1.0432, after losing 2.8% in one month.

Bitcoin fell around 4.5% on Tuesday to $ 21,416, a recent low of 18 months, and extended Monday’s fall of 15% as markets were shaken by cryptocurrency lender Celsius suspending withdrawals. read more

The oil markets began to recover late in the Asian session with US crude oil up 0.13% to $ 121.08 a barrel, after trading down most of Tuesday. Brent oil strengthened slightly to $ 122.42 per barrel.

Gold shrugged off a weaker start with the spot price rising 0.42% to $ 1,826.65 per ounce.

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Report by Scott Murdoch in Hong Kong; Additional reporting by Alun John; Edited by Sam Holmes

Our standards: Thomson Reuters Trust Principles.

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