Asian Stocks Feel the Interest Rate Pressure

On Monday, Asian stocks plummeted to two-month lows as the market was forced to accept the ever-increasing interest rate for U.S and European bonds, causing a major slump in global bonds and strengthening the dollar near multi-week highs.

An Increase In Interest Rate Is a Great Possibility

Investors are apprehensive of what the oncoming U.S. data will bring, especially regarding closely observed ISM indices for manufacturing and services—the latter being pivotal in light of January’s unexpected surge in activity. Around six Fed representatives have also been added to this week’s agenda with plans to discuss the possibility of additional interest rate hikes moving forward.

As the National People’s Congress prepares to launch this weekend with new economic policy goals and government reshuffling, MSCI’s broadest index of Asian stocks outside Japan has dropped by a staggering 1.0%. The Nikkei in Japan is down 0.2%, while South Korea decreased by 1.2%. In China, blue chips have fallen a more modest 0.2%, yet China Renaissance Holdings surged after revealing that its missing chairman is collaborating with Chinese authorities to investigate his whereabouts.

On Friday, the S&P 500 successfully penetrated support at 4,000 due to positive spending and core prices data. This led Fed futures to anticipate rates peaking around 5.42%, which is equivalent to three more interest rate hikes from its current threshold of 4.50% – 4.75%. Additionally, markets are now expecting higher expected rate tops for numerous other central banks such as the European Central Bank and Bank of England, while EUROSTOXX 50 futures rose 0.1%, FTSE futures jumped 0.4%, S&P 500 Futures increased by 0.1% and Nasdaq future edged up a further 0.2%.

Asian Stocks Feel the Interest Rate Pressure

The US Economy Continues to Grow

Bruce Kasman, the lead of economic research at JPMorgan Chase Bank, recently raised his estimation for a quarter-point hike from the European Central Bank to 100 basis points. Germany’s two-year bond yield surpassed 3.0% last Friday – an occurrence not seen since 2008! In addition to this news, Kasman commented that “the risk leans toward further activity from the Fed.” Furthermore, he added that even though demand is proving strong despite tightening times and COVID wreaking havoc on production capacities, there remains a risk that central banks may unintentionally initiate another recession with their quick policy shifts currently underway. The Atlanta Fed‘s eminent GDP Now tracker suggests the U.S economic development is continuing to expand at an annualized 2.7% in the first quarter, indicating no diminishment from the December quarter growth rate.

Recent Developments Are Quite Favorable for the Dollar

Last week, the U.S. dollar surged by 1.3% against a basket of currencies and reached 105.220, with the euro pinned at $1.0546 following its seven-week low of $1.0536 on Friday’s closeout day! Moreover, dovish comments from Japan’s Bank policymakers caused the dollar to reach a nine-week peak versus the yen at 136.27. Unfortunately for gold investors, however, their commodity has been affected negatively as it darkly spiraled down last week by 1;7% and is currently resting around $1,810 an ounce

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Ana Costa

I am resourceful and passionate about taking on whatever task lies ahead of me. I thrive in workplaces that promote diversity and inclusivity, whether it is working in journalism or being in the first place of global progressive social movements. I'm a journalist with a keen interest in reporting on daily global economic, finance, and crypto news. I have a deep understanding of how financial markets and global economies work, and I'm passionate about covering the latest developments in the world of cryptocurrency. I believe that the intersection of finance and technology is where the most exciting stories can be found, and I'm committed to staying up-to-date with the latest trends and emerging technologies in these areas. With years of experience in reporting and a strong network of sources, I strive to provide my readers with insightful and accurate coverage of the topics that matter most. Whether it's a breaking news story, an in-depth analysis of market trends, or an interview with a leading industry expert, I'm always ready to tackle the next big story and deliver it to my audience in a clear and engaging way. I focus on social media marketing, digital marketing, and market research. My strengths lie in creative marketing plans, collaboration with team members, and an eye for rising trends in different target markets.

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