Stocks slide, dollar climbs as rate hike concerns

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FIE PHOTO: A man wearing a protective mask is seen inside the Shanghai Stock Exchange building in the Pudong financial district in Shanghai, China February 28, 2020. REUTERS/Aly Song

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  • Chinese stocks and yuan fall as lockdowns spread
  • The dollar advances against the pound sterling, the aussie and the kiwi
  • The euro remains stable after the victory of Macron

SINGAPORE, April 25 (Reuters) – Asian stocks fell the most in two weeks on Monday as concerns over a rapidly rising U.S. rate and slowing growth rattled investors, while the euro found support after that Emmanuel Macron has won a second term as French President.

MSCI’s broadest index of non-Japan Asia-Pacific stocks (.MIAPJ0000PUS) slid 1.6% to a six-week low, and a boost from authorities extended deep losses for the Chinese yuan.

The Japanese Nikkei (.N225) fell 1.9%. Hong Kong’s Hang Seng (.HSI) fell 3%. S&P 500 futures fell 0.8% while FTSE futures and European futures fell more than 1%. Oil fell 2.7%.

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The euro was broadly flat at $1.0802, compared to dollar gains elsewhere, and it hit a nearly two-month high against a struggling pound.

Macron comfortably rose to a far-right challenge, reassuring markets of France’s commitment to an integrated Europe, even as his economic platform now hinges on parliamentary elections in June. Read more

“The absence of a change of course will reassure not only the other countries of the European Union but also NATO,” said Vincent Mortier, chief investment officer of Amundi, the largest fund manager in Europe.

The news was only mild relief, however, for wider concern over a global backdrop of high inflation and likely rate hikes that have dogged bond markets for months – exacerbated by the war in Ukraine and the disruption caused by coronavirus-related lockdowns in China.

US stocks fell late last week after Federal Reserve Chairman Jerome Powell said a 50 basis point rate hike was on the table at the May meeting and the St. Louis Fed President James Bullard floated the idea of ​​75 basis point hikes.

“Rate and recession concerns are now the biggest risks for investors,” with a particular focus on demand, said Candace Browning, head of global research at Bank of America.

“Soaring food and gas prices, along with the end of major stimulus programs, are worrying investors about the spending capacity of low-income consumers.”

The Treasury market stabilized, holding the benchmark 10-year yield at 2.8581% and the two-year yield above last week’s highs at 2.6399%.

Severe restrictions in China have also started to spread to Beijing, where more than a dozen buildings have been locked down, as concern grows over the economic damage from the Shanghai shutdown.

China’s blue-chip CSI 300 index (.CSI300) has fallen to its lowest since June 2020 and investors have so far been disappointed by political support for the flagging economy.

The midpoint of China’s onshore currency trading band was set at an eight-month low on Monday, seen as an official nod to the recent fall in the yuan and it was quickly sold off to a low year of 6.5225 to the dollar.

The dollar was also on the move elsewhere, although trading was somewhat weakened by the public holidays in Australia and New Zealand. The Aussie slipped 0.8% to a six-week low of $0.7185 and the Kiwi fell 0.4% to a two-month low of $0.6603.

The pound, buffeted by weak retail sales figures last week, slipped 0.3% to hit an 18-month low of $1.2792.

Brent crude futures fell 2.7% to a two-week low of $103.88 a barrel. U.S. crude futures fell 2.6% to $99.38 a barrel.

Copper and iron ore fell in Asia, although soybean oil jumped after Indonesia’s ban on palm oil exports. Read more

The week ahead is marked by US growth data due on Thursday, European inflation figures due on Friday and a monetary policy meeting for the Bank of Japan.

Investors expect US growth to stabilize around 1.1%, much slower than recent past figures, but likely robust enough to withstand rate hikes.

The BOJ meeting will also be watched closely for any adjustment in economic projections or any sign of a policy response to the yen, which has fallen more than 10% in two months.

Bitcoin held just above the resistance at $40,000.

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Reporting by Tom Westbrook; Editing by Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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