Men wearing protective masks use mobile phones in front of an electronic board displaying Japan's Nikkei index outside a brokerage in Tokyo.
SYDNEY Reuters - Asian shares were ending a rough quarter in a sombre mood on Thursday, amid fears that central banks' cure for inflation will harm the global economy, though it is proving to be a fillip for the safe-haven dollar and government bonds.
Policy makers reiterated their commitment to control inflation no matter what pain it caused, but data on U.S. core prices later in the session will only underline the extent of the challenge.
Inflation can be sticky, according to analysts at ANZ. It is broadening from goods to services and wage growth is accelerating. It will take time for labour markets to unwind, and that means inflation can stay higher for longer, even with rapid rate rises. It's too early to pick a peak for interest rates or a bottom for stocks, even though markets have fallen a long way.
The S&P 500 lost almost 16% in the last quarter, its worst performance since the beginning of the epidemic, while the Nasdaq is off an eye-watering 21%.
Early on Thursday, S&P 500 futures and Nasdaq futures were both down 0.3% with little sign that the new quarter will bring in brave bargain hunters.
MSCI's broadest index of Asia-Pacific shares outside Japan was sluggish by 0.4%, bringing its losses to 10% for the quarter.
Japan's Nikkei fell 0.8%, though its drop this quarter has been a relatively modest 4% thanks to a weak yen and the Bank of Japan's dogged commitment to super-easy policies.
In May, Japanese industrial output fell 7.2%, when analysts had been looking for a dip of only 0.3%, as evidenced by the data showing Japanese industrial output went down 7.2% in May.
The Chinese blue chips added 0.6%, according to a survey showing a marked increase in services activity.
The analysts at JPMorgan are looking at a major rebound in China in the coming months and felt that with so much bad news poured into world markets, positioning argued for a bounce.
They wrote in a note that it is not that we think the world and economies are in great shape, but just that average investor expects an economic disaster, and that risky asset classes could recover most of their losses from the first half.
The risk of recession was enough to bring the U.S. 10-year yield back to 3.085% from their previous peak of 3.498%, though that is still up 77 basis points for the quarter.
The yield curve has continued to flatten and turned negative in the three to seven-year range, while futures are almost fully priced for another Federal Reserve hike of 75 basis points in July.
The Fed's hawkishness has combined with investor desire for liquidity in difficult times, and gifted the U.S. dollar its best quarter since late 2016 due to the Fed's hawkishness. The dollar index was trading up at 105.100 and is just a whisker from its recent two-decade peak of 105.79.
The euro was struggling at $1.0442, having shed 5.6% for the quarter so far, but it remains above the May trough of $1.0348.
The Japanese yen is in a worse shape, with the dollar having gained more than 12% this quarter to 136.70 and hitting its highest since 1998.
The rising interest rates and a high dollar have not been good for non-yielding gold, which was stuck at $1,818 an ounce, having lost 6% for the quarter. GOL Oil prices were flat on Thursday, due to concerns about an unseasonable slowdown in U.S. gasoline demand, even though global supplies remain tight. O R OPEC and OPEC end their two days of meetings on Thursday with little expectation that they will be able to pump more oil despite U.S. pressure to expand quotas.
September Brent was up 2 cents to $112.47 a barrel, while U.S. crude fell 5 cents to $109.73.