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Asian stocks fell on worries about the hit to growth from
China's zero-COVID policy.
The U.S. currency was finding favour after the Federal Reserve
raised rates by 50 basis points this week. The market is pricing
in a more than 90% chance of a 75 bps hike in June, according to
Refinitiv data.
U.S. payrolls data due later on Friday will help traders gauge
the strength of the U.S. economy. Economists polled by Reuters
predicted the data would show the United States created 391,000
new jobs in April, versus 431,000 a month earlier.
"The trend is still for a strong and very tight labour market,
which is feeding into wage increases and is an issue for
inflation longer term," said Gergely Majoros, a member of the
investment committee at asset manager Carmignac. This made it
hard for the Fed to keep prices stable, he added. "Job creation
is still too hot for the Fed to achieve its mandate." U.S. stock
index futures dropped 0.29% after the Dow Jones Industrial
Average and the S&P 500 both slid more than 3% overnight, and
the Nasdaq Composite shed 4.99% in its biggest single-day plunge
since June 2020. [.N] European stocks fell 1.14% to their lowest
since mid-March and were heading towards their worst week in two
months. Britain's FTSE dropped 0.73%.
MSCI's world equity index fell 0.35%, approaching its lowest
since Feb 2021. The dollar hit a 20-year high of 104.06 against
an index of currencies before trimming gains.
It rose 0.17% to 130.34 yen, also close to its highest in 20
years. The euro rose 0.45% to $1.0584, however.
The European Central Bank should raise its deposit rate back
into positive territory this year, French central bank chief
Francois Villeroy de Galhau said on Friday, comments that point
to his support for at least three rate hikes in 2022. Sterling
fell to its lowest against the dollar in nearly two years after
dropping 2.2% on Thursday. The Bank of England raised rates by
25 basis points on Thursday as expected, but two policy makers
expressed caution about rushing into future rate hikes. Bond
yields are also rising on expectations of a fast pace of rate
hikes. The yield on U.S. 10-year notes was last 3.0828% after
crossing 3.1% overnight for the first time since November 2018.
[US/] Germany's 10-year government bond yield rose to 1.082%,
its highest since 2014.
"We see the Ukraine war reducing global growth and increasing
inflation, mostly via higher energy costs," BlackRock analysts
said. MSCI's broadest index of Asia-Pacific shares outside Japan
shed 2.69% and hit its lowest level since March 16, the day when
Chinese vice premier Liu He boosted shares by pledging to
support markets and the economy. The benchmark is down 4% from
last Friday's close, which would be its worst week since
mid-March. Japan's Nikkei bucked the trend, rising 0.69% on its
return from a three-day holiday. Chinese blue chips lost 2.53%,
the Hong Kong benchmark fell 3.89% and China's yuan tumbled to
an 18-month low in both onshore and offshore markets. China will
fight any comments and actions that distort, doubt or deny the
country's COVID-19 response policy, state television reported on
Thursday, after a meeting of the country's highest
decision-making body. Investors said that appeared to rule out
any easing in the zero-COVID policy, which is slowing Chinese
economic growth and snarling global supply chains. "The silver
lining is the expectation that new Chinese fiscal measures could
come out over the weekend," said Dickie Wong, director of
research at Hong Kong brokerage Kingston Securities. Oil prices
climbed for a third straight session, shrugging off concerns
about global economic growth as impending European Union
sanctions on Russian oil raised the prospect of tighter supply.
Brent futures jumped 2.16% to $113.25 a barrel. U.S. crude
climbed 2% to $110.41 a barrel. [O/R]
Gold gained 0.36% to $1883.63 an ounce. [GOL/]
(Additional reporting by Alun John in Hong Kong and Sujata Rao
in London; Editing by Andrew Heavens and Chizu Nomiyama)
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