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Business

The dollar reigns while investors fear recession pain




  • Oil, Europe stock futures stable after steep fall
  • Euro whines together at low 20 years; sterling pressed
  • China’s shares fall due to a new Shanghai virus outbreak

TOKYO / SINGAPORE, July 6 (Reuters) – Asian stocks fell and the dollar stood for two decades high on the euro on Wednesday as investors’ fears deepened that the continent was leading the world into recession, while oil and European stock futures became a shaky attempt to stabilize.

Brent oil futures have fallen this month due to concerns that a global downturn will suppress demand. Prices fell 9.5% to a 2-1 / 2 month low of $ 101.10 on Tuesday, before jumping slightly to $ 103.86 a barrel in the Asia session on Wednesday.

MSCI’s Asia-Pacific equities index outside Japan (.MIAPJ0000PUS) fell 1%, led by a 2% fall for Taiwan’s benchmark index (.TWII) – heavy with growth-sensitive computer chip manufacturers – which reached an 18-month low. Japanese Nikkei (.N225) fell 1.1%.

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S&P 500 futures fell 0.1% while FTSE futures and EuroSTOXX 50 futures rose 1% after heavy sales on Tuesday.

The news has been relentlessly negative, with talk of gas rationing in Europe, a political crisis in Britain and a new flare-up of COVID-19 cases that led to new restrictions in Shanghai. read more

In the US, the two-year government interest rate has fallen below the 10-year interest rate, a reliable market signal of a recession that limits growth in the medium term.

“The drumming is getting louder and louder about recession risk,” said Jason Teh, chief investment officer at Vertium Asset Management in Sydney.

“Right now, defense is the name of the game. It’s the best strategy right now, because in a recession, a lot of things can fall out of bed.”

As a result, the dollar has been king, and a security bid has even returned to the depressed Japanese yen. The US dollar index peaked in 20 years at 106.79 on Tuesday, hoisted by a falling euro.

The index hovered at 106,440 on Wednesday and the yen rose around 0.4% to 135.39 per dollar.

The euro shrank to $ 1.0266 after falling as far as $ 1.0236 on Tuesday, and traders expect little respite. Sales may follow if the retail sales figures in the eurozone that arrive at 0900 GMT disappoints expectations of a monthly increase of 0.4% in May.

“There are no significant support levels for EUR / USD before $ 1,” said Commonwealth Bank of Australia strategist Kristina Clifton.

Sterling was close to a two-year low of $ 1.1944 after two of Britain’s top prime ministers resigned, putting Prime Minister Boris Johnson’s leadership under new pressure. read more

GAS GAS GAS

Uncertainty over Europe’s gas supply is leading the last round of concerns, and has sent prices soaring towards the decline in other commodities due to growth concerns.

Benchmark Dutch gas prices have doubled since mid-June.

Some investors are concerned that the flow along the Nord Stream pipeline, which brings gas from Russia to Germany, may not resume after a ten-day maintenance shutdown from July 11, and that winter supply shortages will then lead to rationing and a sharp drop in economic activity. .

The backdrop is rising interest rates.

The Federal Reserve publishes minutes later on Wednesday from the June meeting, where it announced the sharpest rise in the US reference rate in almost 30 years. It is likely to signal more gains as Fed officials have said their top priority is to fight inflation, even at the expense of growth.

“The likelihood of a soft landing had dropped massively,” August Hatecke, co-director of UBS Wealth Management Asia Pacific, told investors at a conference in Singapore. The growth-sensitive Australian dollar was stuck near a two-year low of $ 0.6805.

Spot gold was last stable at $ 1,771 an ounce after falling on the strong dollar overnight. Safe harbor is down around 3% this year, less than the heavy losses for shares and bonds.

Government bonds were stable in Asia with a 10-year yield of 2.8327% and a two-year yield of 2.8385%. Bitcoin, which has been torn apart from risky assets, set at $ 20,115.

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Reporting by Sam Byford; Edited by Sam Holmes and Kim Coghill

Our standards: Thomson Reuters Trust Principles.



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