Asian stocks recover losses amid market volatility and dollar decline

Most Asian stock indices recovered losses on Thursday,
with trading choppy and investors digesting central banks’ signals about the future of interest rates.

Topıc

the details

Unbundling the interest trade

American markets

General economic situation

the details

Japan’s Topix index rose after losses of 1.8%, and major stock indices rose in China and Hong Kong.
The MSCI Asia-Pacific index also rose slightly today, but is still down 1.3% since the beginning of the week.
The dollar fell against major currencies, including the yen.

Minutes from the Bank of Japan’s meeting last week, which saw interest rates raised, showed one member calling for timely rate hikes to avoid rapid rises, while another suggested the neutral interest rate should be 1%.

Last week, global markets were affected by the expectation that the US and Japanese central banks would move in opposite directions, reducing the yen’s role as a cheap source of funding for financial assets.

Unbundling the interest trade

According to Quincy Crosby of LPL Financial, there is more room to unwind the interest trade currently,
but the lower speed of transformation allows investors to catch their “breath.”
“A weaker dollar, driven by markets’ perception that the Fed will soon begin an easing cycle, would support a stronger yen – a negative for this trade,” he added.

Investors have exited three-quarters of the interest trade, as the recent recession wiped out all positive year-to-date returns, according to JPMorgan strategists.
The dollar was slightly weaker today as yields fell in Asian trade, partly reflecting moves from the previous session. Weak demand for the 10-year Treasury auction and $31.8 billion in debt offerings from major companies were headwinds.

The outcome of the Treasury auction “is consistent with our view that we are headed toward a sustained near-term correction,” said Zachary Griffiths, head of U.S. investment and macro strategy at CreditSights. “The repricing that followed a weak payroll report appears to be greatly exaggerated,” he added.

The region’s technology sector index fell about 2%, with shares of companies such as SK Hynix Inc falling 4.8% and Taiwan Semiconductor Manufacturing Co falling 2.8%.

American markets

The S&P 500 closed down 0.8%, with Nvidia shares leading the losses. Super Micro Computer Inc. fell 20% on disappointing earnings. In late trading, Warner Bros. declined.
Discovery Inc, the parent company of CNN and TNT, reported a $9.1 billion loss as a result of writedowns of the value of its traditional television networks.
Sony shares rose today after the Japanese consumer electronics company boosted its full-year operating income guidance.

General economic situation

Markets have been in disarray since weak economic data last week raised concerns that the Federal Reserve’s decision to hold interest rates at their highest level in two decades threatens a deeper economic slowdown.
Economists at JP Morgan believe there is a 35% chance that the US economy will head into recession by the end of this year, up from 25% at the beginning of last month.

“Stocks are still at risk,” says Fouad Razaqzadeh of City Index and Forex.com, adding: “More evidence of a bottom is needed to stimulate investor entry again. Overall, sentiment remained cautious.
Not many people were confident about Buy stocks in this recent decline, especially with the announcement of the US Consumer Price Index approaching next week.”

Oil prices rose as investors remained concerned about the possibility of a retaliatory strike from Iran on Israel.
Gold also rose for the first time in six sessions.

Asian stocks recover losses amid market volatility and dollar decline

Asian stocks recover losses amid market volatility and dollar decline

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