Home Finance Bond yields rise on recession concerns, Asian markets fall tumble

Bond yields rise on recession concerns, Asian markets fall tumble

An employee views a FTSE share index board in the atrium of the London Stock Exchange Group Plc's offices in London, U.K., on Wednesday, May 29, 2019. While the FTSE 100 Index has climbed about 15 percent since June 2016 in local currency, it's down in both euro and dollar terms. Photographer: Luke MacGregor/Bloomberg via Getty Images

Asian markets declined on Monday, pulling out from more than three-week highs as investors’ appetite for risk was dampened by concerns about a slowing global economy.

Bond yields decreased as speculation increased that an anticipated U.S. recession would delay the Federal Reserve’s vigorous tightening drive. Markets intended to watch the Fed Open Market Committee meeting, which is set to commence on Tuesday, for policy cues.

The demand for the US dollar as a safe haven currency helped the dollar strengthen its rebound out of a 2-1/2-week low versus key rivals at the same time.

Risk markets are undoubtedly priced for a downturn, but are they geared for a full-fledged recession as well? It certainly isn’t, people would contend, according to Ray Attrill—the National Australia Bank’s head of currency strategy.

In that regard, it’s difficult to conclude they have found a low in terms of risk sentiment, he continued.

Chinese blue chips (.CSI300) dropped 0.82 percent, while Japan’s Nikkei (.N225) declined by 0.75 percent.

Hong Kong’s Hang Seng (.HSI) tumbled 0.75%, including its digital index (.HSTECH) plunging 1.96%.

After reaching its highest level since June 29 on Friday at 160.03, the MSCI’s broadest index of Asia-Pacific equities (.MIAP00000PUS) fell 0.54 percent to 158.80.

U.S. S&P 500 e-mini futures (.SPX) decreased by 0.08 percent, signalling a continuation of the benchmark’s 0.93 percent decline on Friday. At that time, a survey revealed that business activity had decreased, marking its first halt in 2 years, despite insistently rampant inflation and speedily rising prices.

Data from earlier that day also revealed an unexpected decline in eurozone economic activity.

After a 1.77 percent decline for the gadget-based stock index, Snap Inc (SNAP.N), the company that owns Snapchat, saw its weakest-ever sales growth, and Nasdaq futures were roughly flat.

Investors are keeping a close eye on this week’s financial results from major companies like Apple (AAPL.O) and its allied powerhouses like Microsoft (MSFT.O), among others, to see how much a strong dollar would harm them. 

The FTSE and EURO STOXX 50 index futures in Europe both indicated downward by 0.61 percent and 0.52 percent, respectively.

The dollar index, which compares the safe-haven currency to six important peers, increased from a 2-1/2-week trough of 106.10 recorded on Friday but remained relatively stable at 106.64.

While the euro fell 0.04 percent to $1.02075, the dollar increased by 0.11 percent to 136.235 yen.

The decade-worth U.S. Treasury yield barely changed over the past two sessions, falling from a high of 3.083 percent to 2.785 percent.

Australian yields also decreased to their lowest level since May 31 at 3.285 percent, while the corresponding Japanese government yield curve fell to its lowest level since March 10 at 0.18 percent.

On Wednesday, the Fed will wrap up a two-day meeting, and the markets are pricing in a rate hike of 75-basis points, with a roughly 9 percent probability of a full percentage point increase.

Anxiety that soaring U.S. rates will stifle growth in gasoline demand caused crude oil to decline.

Both Brent crude prices for September settlement while U.S. WTI—or, the West Texas Intermediatecrude futures for Sept distribution saw declines for a fourth day. Brent crude futures for the same month settlement lost 48 cents, or 0.5 percent, to $102.72 a barrel.

The price of gold was unchanged at $1,725.17 an ounce thanks to falling bond yields.

Brokerage Pepperstone’s Head of Research, Chris Weston, had stated that the bullion might break through the opposition at approximately $1,770 if the Fed issues a dovish spike on Wednesday, which is forward signaling for a slowdown in the pace of raises for the rest of the year.

According to Weston, the yellow rock is effective against a background where traders are debating whether the USD serves as their default hedge against stock drawdown.

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