Asian stocks fell on Friday after a slew of Federal Reserve officials signaled they will aggressively fight inflation and the Nasdaq 100 fell to its lowest level since October.
Stocks tumbled across the region, with indices in Japan and Korea falling more than 1%. US futures fluctuated after US stocks fell on Thursday, led by tech companies, which are seen as more sensitive to higher rates. Treasury yields rose, while Japan’s five-year yields rose to their highest level since 2016.
Fed Governor Lael Brainard said officials could raise rates starting in March to ensure high generation price pressures are under control. The President of the Federal Reserve Bank of Philadelphia, Patrick Harker, and the leader of the Bank of Chicago, Charles Evans, joined calls from their fellow policymakers to raise interest rates this year.
Rising rates, the result of strong economic growth, could propel investors toward value stocks, which tend to be more cyclical and offer short-term cash flows.
“We’re in a position where a lot of what has been positive for equities may be turning neutral or negative,” said Sarah Hunt, portfolio manager at Alpine Woods Capital Investors. “While there are still few alternatives, it makes the equity market ready for more fluctuations in the coming months as we see the data shake up and how the Fed reacts.”
Additionally, earnings may come into play – the valuation gap between Big Tech and the rest of the market is likely to narrow as the pace of earnings per share growth remains below the S&P 500 in the fourth quarter, according to Gina. Martin Adams, chief equity strategist at Bloomberg Intelligence.
Prices paid to US producers slowed in December as two key drivers of inflation in 2021 (food and energy) fell from the previous month, representing a respite from the recent trend of sizable increases. At the same time, producers continued to face a variety of material shortages, limited labor supply and transportation bottlenecks that sent prices skyrocketing last year.
In Asia, the Bank of Korea raised interest rates on Friday for the third time since the summer. The rare consecutive increase is likely to indicate that Governor Lee Ju-yeol was feeling increasingly uncomfortable waiting to move again, following recent signs that the Fed will likely increase borrowing costs earlier and more aggressively.
Oil was heading for a fourth weekly advance, the longest streak since October, amid signs that the market is tightening.
Here are some key events to come:
- Wells Fargo, Citigroup and JPMorgan are due to report their earnings on Friday.
- US Business Inventories, Industrial Production, University of Michigan Consumer Sentiment, Retail Sales Friday.
- New York Fed Chairman John Williams speaks Friday.
Some of the main movements in the markets starting at 2:00 p.m. in Tokyo:
- S&P 500 futures gained 0.1% The indicator fell 1.4% on Thursday
- Nasdaq 100 futures were flat. The index fell 2.6% on Thursday
- S & P / ASX 200 fell 1%
- Topix fell 1.4%
- Kospi decreased 1.4%
- Hang Seng fell 1%
- Euro Stoxx 50 futures fell 0.9%
- The Bloomberg Dollar Spot Index decreased 0.2%
- The euro gained 0.2% to $ 1.1475
- The Japanese yen rose 0.4% to 113.72 per dollar
- Yield on 10-year Treasuries rose two basis points to 1.72%
- Australia’s 10-year bond yield fell around one basis point to 1.85%
- Japan’s 5-year yield rose two basis points to minus 0.02%
- West Texas Intermediate crude fell 0.3% to $ 81.89 a barrel
- Gold rose 0.2% to $ 1,826.41 an ounce
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