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Monday, July 4, 2022
Stocks & Shares

Asian shares slip on rate hike concerns

Asian shares

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4% and Tokyo’s Nikkei 1.2%

Asian shares slipped on Monday and Wall Street futures eked out slight gains amid worries the U.S. Federal Reserve would this week underline its commitment to fighting inflation with whatever rate pain was required.

The euro showed little reaction after French President Emmanuel Macron lost control of the National Assembly in legislative elections on Sunday, a major setback that could throw the country into political deadlock.

Trade was choppy with the U.S. on holiday and Nasdaq futures see sawed through the session to be last up 0.3%, while S&P 500 futures firmed 0.2%. EUROSTOXX 50 futures fell 0.3% and FTSE futures 0.2%.

The S&P 500 fell by almost 6% last week to trade 24% below its January high. Analysts at BofA noted this was the 20th bear market in the past 140 years and the average peak to trough bear decline was 37.3%.

Investors will be hoping it does not match the average duration of 289 days, given it would not end until October 2022.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4% and Tokyo’s Nikkei 1.2%.

Chinese blue chips gained 0.5%, perhaps aided by news President Joe Biden was considering removing some tariffs on China.

Looming over markets are concerns major central banks will have to tighten so aggressively to contain runaway inflation that they will tip the world into recession.

Market volatility has remained elevated with the VIX index seeing the highest weekly close since late April, a theme that goes beyond equities with a spike in FX and rates volatility alongside wider credit spreads, said Rodrigo Catril, a strategist at NAB.

He said: At this stage it is hard to see a turn in fortunes until we see evidence of a material ease in inflationary pressures.

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