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Tuesday, December 6, 2022
Stocks & Shares

Asia stocks down on prospects of monetary policy tightening

Asia stocks down

ASX 200 edged down 0.17% and Hong Kong’s Hang Seng Index was down 0.38%

Asia Pacific stocks were mostly down on Tuesday morning, with U.S. equity futures showing modest gains and sovereign bonds retreating. Investors continue to calculate the prospect of more and more central banks tightening monetary policy to respond to high inflation.

South Korea’s KOSPI was up 0.44% by 2:41 AM GMT. The Bank of Korea released the minutes from its latest financial stability board meeting earlier in the day.

In Australia, the ASX 200 edged down 0.17%, with the Reserve Bank of Australia handing down its policy decision later in the day. The central bank is widely expected to hike its interest rates for the first time since 2010.

Hong Kong’s Hang Seng Index was down 0.38%. Markets surged up to 4% earlier in the session after re-opening from Monday’s holiday. Japanese and Chinese markets are closed for a holiday.

Dip-buying in the technology sector boosted U.S. equity shares to a higher close on Monday, after what was a difficult April for global markets.

U.S. Treasuries fell on Monday, with the benchmark 10-year yield at 3% for the first time since 2018 and the benchmark real yield pushed back above zero. There is no cash trading in Asia due to the Japanese holiday.

Investors now await the U.S. Federal Reserve’s policy decision, due to be handed down on Wednesday, where the central bank is expected to unveil the biggest interest-rate hike since 2000. Other central banks will also hand down their policy decisions throughout the week, including the Bank of England on Thursday.

It remains to be seen whether these policy decisions can tighten financial conditions without triggering an economic downturn. Some investors remained cautiously optimistic, but this optimism has not lasted long in 2022 to date.

Our view remains that the right strategy right now is to position for inflation, a clear and present fact, rather than recession, which is still only a possibility, UBS Global Wealth Management chief investment officer for the Americas Solita Marcelli said in a note.

The U.S. will also release data throughout the week, including factory orders later in the day and the April 2022 jobs report, including non-farm payrolls, on Friday.

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