A broker reacts while trading at his computer terminal at a stock broking firm in Mumbai, India February 1, 2020. REUTERS/Francis Mascarenhas
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SING`ORE, May 12 (Reuters) – Stocks fell and the dollar rallied on Thursday as data showed persistently high US inflation and investors worried about the economic toll of aggressive rate hikes in an attempt to tame them.
US markets plummeted after the news, then closed significantly lower. S&P 500 futures rose 0.5% in a bumpy session in Asia. Forex trading has also been volatile but has pushed the dollar index within a hair’s breadth of a two-decade high.
MSCI’s broadest index of Asia Pacific equities outside of Japan (.MI`J0000PUS) fell 1%. Japan’s Nikkei (.N225) fell 1%.
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Bitcoin was pinned below $30,000 on Thursday, nursing losses from a nearly 27% erasure that has stripped $11,000 from its price in about a week.
US consumer prices rose 8.3% in the 12 months to April. That was slower than the previous month’s 8.5% pace and raised hopes that the pace of price increases has peaked. However, it also came in above market forecasts at 8.1%, reaffirming concerns that rates will need to rise quickly to tame it. Continue reading
“We are now very well anchored with at least two more 50 basis point hikes on the agenda. It really is the end of free money for stock markets,” said Damian Rooney, director of institutional sales at Perth-based brokerage Argonaut.
“I think we were probably delusional six months ago with the rise of US stocks on hopes and prayers and the madness of meme stocks and we suddenly went a little bit back to reality,” he said.
Shares of Apple (A`L.O) fell 5% overnight, dragging the S&P 500 (.SPX) down 1.65% and the Nasdaq (.IXIC) down 3.2%.
Short-dated government bonds sold off on the back of the data, but the longer end of the curve rallied as investors feared steep rate hikes would slow growth.
The benchmark 10-year government bond yield fell six basis points (bps) overnight and another four bps to 2.8877% in Tokyo trade. The gap between two-year and ten-year yields narrowed, leading to a flattening of the yield curve.
“There should be a tipping point in how far the Fed can be pushed before the odds are clearly pointing to a hard landing,” said Jan Nevruzi, US rates strategist at NatWest Markets.
SELL IN MAY
The Nasdaq is down nearly 8% so far in May and more than 25% this year, bearing the brunt of the selling as higher U.S. yields draw money out of expensively valued tech stocks.
Cryptocurrency markets are also melting, with the collapse of the so-called stablecoin TerraUSD highlighting the turmoil. Continue reading
A slowing growth picture outside the United States is also shaking investor confidence as the war in Ukraine threatens an energy crisis in Europe and the extension of lockdowns in China further disrupts supply chain chaos.
Real estate developer Sunac China (1918.HK) said it missed an interest payment on bonds and will miss more as a credit crunch continues to grip China’s real estate sector. Continue reading
Uncertainty about almost everything but US interest rate hikes has benefited the dollar. It held the euro near recent lows at $1.0524 and fluctuated around 129.78 yen on Thursday, while trade-sensitive currencies came under pressure.
The Australian dollar was volatile on the US inflation data but failed to sustain above $0.70 and last bought $0.6943.
Sterling was at a two-year low of $1.2230 as the standoff over post-Brexit trade rules for Northern Ireland deepens. Continue reading
The Hong Kong Monetary Authority issued $202 million on Thursday to support the Hong Kong dollar, which reached the weaker end of its peg to the greenback.
In commodities trading, oil prices stabilized after rising on Wednesday amid concerns over western gas flows from Russia to Europe.
Brent crude futures fell 0.7% to $106.78 a barrel and US crude fell 0.6% to $105.07 a barrel.
UK activity and growth data is due later in the day.
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Edited by Muralikumar Anantharaman
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