Asian equities set for cautious start as US stocks tumble

On Friday, the Asian stock market looked set for a cautious start as concerns about an economic slowdown bolstered sovereign bonds.

The futures went up for Japan and Australia while the S&P 500 and Nasdaq 100 contracts fell after US shares posted their worst first half since 1970.

Hong Kong markets are closed for a holiday marking the 25th anniversary of Chinese rule. President Xi Jinping is expected to give a speech later Friday.

Chinese shares are one of the few bright spots in global markets, following a recent rally that has taken the CSI 300 Index to the brink of a bull market. Easing Covid curbs and brighter economic data have contributed to the rebound.

Treasury yields fell Thursday as consumer spending and inflation weakened the belief that sharp Federal Reserve hikes will spark a recession. The 10 year yield fell below 3% before closing just above.

A gauge of the dollar fell. Crude held losses due to economic growth concerns. After its latest swoon, the price of the virtual currency struggled below the $20,000 level.

The global economy is set for a slowdown due to tighter monetary settings in much of the world in order to get inflation under control, according to investors.

If anyone thinks that equities can rally into the back of the year, they are making the assumption that the Fed is going to let go of its focus on price stability and step back from that, Seema Shah, chief strategist at Principal Global Investors, said on Bloomberg Television. We have a very different view. We think things are going to get tough. Inflation-adjusted personal spending fell for the first time this year, according to the latest US data. Gains in the previous four months were revised down.

In July, traders expect a 75 basis-point increase in the Fed's rate. Swaps referencing policy meeting dates price in a peak rate near 3.5% in March 2023 and a drop to about 3% by the end of the year.

This week s MLIV Pulse survey looked at the outlook for earnings and stock prices.

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