Asian equity markets slid after a slump in U.S. stocks reawakened volatility as the quarter draws to a close. The dollar extended losses with bonds as central banks worldwide shift toward a more hawkish tone.
Stocks from Sydney to Hong Kong declined after the S&P 500 Index lost the most in six weeks. The technology sector’s woes deepened as investors sold off the year’s biggest winners. The Aussie dollar strengthened as China’s official factory gauge rose. Australian 10-year yields jumped for a third day after the benchmark U.S. rate topped 2.29 percent for the first time in a month. Oil continued to climb back after entering a bear market.
Volatility, absent for much of the year, is back as the debate on normalizing central bank policy intensifies after nine years of unprecedented stimulus. That suggests some investors are growing concerned about the economy’s ability to withstand a tightening cycle. Technology stocks remain under pressure, while banks have been supported on the prospect for higher rates.
Still, global equities are poised for an eighth month of gains that pushed stocks to a record high at the beginning of last week. U.S. stock investors have been putting their faith in the robustness of earnings as the economy continues its recovery, shrugging off a host of worries from oil’s slump into a bear market to political wrangling in Washington.
Bond fund managers, concerned about slowing inflation, will be watching key U.S. inflation data due out later in the day. A report early Friday showed Japan’s core consumer prices crept higher for a fifth straight month, but their slow rise means inflation remains far from the Bank of Japan’s 2 percent target. In China, the factory report adds to evidence that the world’s second-largest economy maintained its momentum in the second quarter, giving policy makers room to focus on reining in financial risks and cooling a frothy property sector.
The main upcoming events include:
- U.S. inflation remains in focus Friday with the core PCE deflator, a favorite Fed measure. Analysts expect the month-over-month number eased to 0.1% for May and the annual rate slowed to 1.4%. Personal income and spending are also expected to grow more slowly than the 0.4% rise in April.
Here are the main moves in markets:
- Japan’s Topix dropped 0.9 percent, trimming the quarter’s gain to 6 percent. Australia’s S&P/ASX 200 Index lost 1.6 percent. South Korea’s Kospi declined 0.5 percent, paring its quarterly advance to 10 percent. Singapore’s Straits Times Index slumped 1 percent.
- Hong Kong’s Hang Seng Index slid 1 percent and the Shanghai Composite Index retreated 0.5 percent.
- Futures on the S&P 500 Index slipped less than 0.1 percent. The underlying gauge fell 0.9 percent on Thursday, the most since May 17. It’s still up 2.4 percent this quarter. The Nasdaq 100 Index lost 1.7 percent, extending its slide this week to pushing its loss in June past 2 percent.
- The yen rose 0.3 percent to 111.82 per dollar, extending gains to a third day to pare its quarterly loss to 0.4 percent. The Australian dollar climbed 0.2 percent, strengthening for a third day.
- China’s offshore yuan gained for a fourth day, bringing its increase for the week to 1.1 percent.
- The Bloomberg Dollar Spot Index retreated 0.1 percent, heading for a monthly loss of 1.5 percent. It’s down the past four months.
- The euro was flat at $1.1436, after increasing 0.6 percent on Thursday to the highest levels since last year’s Brexit vote.
- The pound strengthened 0.1 percent to $1.3020, rising for an eighth day. The currency is up 5.5 percent for the six months.
- WTI crude futures rose 0.6 percent to $45.20 a barrel. Oil is up more than 4 percent this week with prices climbing as government data showed a drop in U.S. gasoline supplies that have remained stubbornly high at the start of the summer driving season.
- Gold gained 0.1 percent to $1,246.86 an ounce, heading toward its first monthly decline this year.
- The yield on 10-year Treasuries was steady after rising four basis points to 2.27 percent on Thursday. The rate has climbed 13 basis points for the week.
- Australian benchmark yields climbed eight basis points to 2.58 percent.