SYDNEY : Asian markets were in a pensive mood on Wednesday as shell-shocked investors waited to see just how aggressive the Federal Reserve would be on rates, with many fearing drastic action would risk tipping the world into recession.
"Against a backdrop of sky-high inflation, rising rates, and growing recession concerns, the S&P 500 has had its worst start to the year since 1962," noted analysts at Goldman Sachs. With so much priced in, a few brave investors were looking for bargains early Wednesday and S&P 500 futures edged up 0.4 per cent, while Nasdaq futures rose 0.6 per cent. EUROSTOXX 50 futures added 0.3 per cent and FTSE futures 0.2 per cent.
Data on Chinese retail sales and industrial output for May were a little better than forecast, but still showed the drag from coronavirus lockdowns. Two-year yields stood at 3.38 per cent, after touching the highest since 2007 at 3.456 per cent overnight. Given many U.S. borrowing rates are linked to yields, financial conditions have already tightened markedly there even before the Fed hikes.Treasury yields are also the benchmark for bonds across the globe, so financial conditions are tightening pretty much everywhere. That is a major headwind for consumer spending power, while pressuring emerging market countries that borrow in dollars.
China and Hong Kong both up by 1.4%, but then they are too small to be called Asia:)
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