The global bond rally has resulted in a steady open in Asia on Friday, as investors assess their expectations for inflation and interest-rate hikes because of the escalating fears of an economic downturn.
Equity futures signals cautious starts in Japan, Australia and Hong Kong after US shares closed near session highs, up more than 3% over the last three days. Early in Asian trading, the contracts for the S&P 500 and Nasdaq 100 dipped.
Treasuries put the two-year yields on course for the biggest weekly drop since March 2020, as a result of a rally that put policy-sensitive two-year yields on course for the biggest weekly drop since March 2020. A dollar gauge was little changed, while the yen held a 1% jump against the dollar.
Oil held a drop to around $104 a barrel and a gauge of commodities has fallen to its lowest level since February in further signs of economic angst.
The data from Federal Reserve officials and the latest comments from the US added to the concerns. There were jobless claims near a five-week high and manufacturing and services activity cooled.
In testimony to lawmakers, Fed Chair Jerome Powell reiterated that his commitment to bringing down price increases is unconditional. Fed Governor Michelle Bowman said she supports raising interest rates by 75 basis points in July, followed by a few more half-point hikes.
If an economic downturn takes hold, investors are grappling with the question of what will happen next. There is a chance that central banks will be able to relax on the pace of interest-rate hikes because of cooling price pressures. Traders are starting to price out any Fed action on rates after the December meeting and scaling back the tightening they expect.
Read more: Traders Hedge Fed Cuts in 2023 as the Recession Risk Hits Yields
Markets are negotiating a fraught transition from front-loaded tightening towards demand destruction and peak price-pressure of Citigroup Inc. strategists William O Donnell and Edward Acton wrote in a note.
How will the second half of this year play out for asset classes? We are re-running MLIV's 2022 asset survey from December to see how street views have evolved amid the turmoil and volatility in the past few months.
Some of the biggest moves in markets are:
The Japanese yen was at 134.97 per dollar.
None of China s property slump is a bigger threat than it is in its Lockdowns.
There is no age of credibility for central banks that is over.