Asian stocks and currencies plummet in broad sell-off: Markets join in

(Bloomberg) — Asian stocks and currencies tumbled on worries that U.S. interest rates could remain high for longer and signs that China’s growth recovery is stalling.

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MSCI’s Asia Pacific Index fell the most in three months as shares from Hong Kong, Japan and South Korea collapsed. Futures contracts for U.S. and European stocks held steady in Asian trading after the S&P 500 erased earlier gains and fell more than 1% in a volatile session.

A range of China’s economic indicators showed that the country’s economic recovery remains patchy. While both gross domestic product and fixed capital formation exceeded expectations, data on retail sales and industrial production fell short of expectations. The impact spread to the region’s currencies, with a gauge of emerging market currencies falling to new lows for the year.

“Chinese data looks strong in the headlines, but the details are weak,” said Charu Chanana, head of currency strategy at Saxo Markets in Singapore. “This could indicate that the economy needs more support, and markets will continue to position for a weak yuan.”

The Indonesian rupiah fell above 16,000 per dollar for the first time since 2020, prompting the country’s central bank to intervene in the foreign exchange market. The South Korean won fell to its lowest level since 2022.

The offshore yuan posted morning losses as officials unexpectedly weakened its defenses as a resurgent dollar and poor sentiment pushed it toward a policy redline.

Government bonds held steady on Tuesday after bond yields rose to new year-to-date highs on stronger-than-expected retail sales. Oil prices rose as Israel vowed to respond to an unprecedented attack from Iran, keeping tensions high in the Middle East.

Elsewhere, the Japanese yen remained under pressure after rising to a new 34-year low against the dollar overnight. The growing risk that authorities in Tokyo will intervene in the market to stem the decline remains, after Japan’s finance minister warned that he is ready to take all available measures in the foreign exchange market if necessary.

Anxiety meter

Volatility increased, with the premium for one-month put options to protect against a decline in US stocks reaching the highest since October. Wall Street’s “fear gauge” – the VIX – reached unprecedented levels this year. The S&P 500 broke below 5,100 and fell to its lowest level in almost two months. The tech-heavy Nasdaq 100 fell more than 1.5%. Both gauges exceeded their 50-day moving averages – seen as a bearish signal by several chartists. Banks outperformed thanks to a surprise profit from Goldman Sachs Group Inc.

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Yields on 10-year government bonds peaked on Monday, while those on two-year government bonds stood at almost 5%. Bonds also came under pressure as JPMorgan Chase & Co. and Wells Fargo & Co. entered the US high-quality bond market, the first in a likely parade of bond sales by banks following the results.

U.S. retail sales rose more than forecast in March and were revised upwards last month, showing resilient consumer demand that continues to fuel a surprisingly strong economy. As long as a robust labor market supports household demand, there is a risk that inflation will become entrenched.

On the commodity front, West Texas Intermediate made progress in Asia after regaining the $85 mark on Monday. Top Israeli officials reiterated that the country has no choice but to respond to the Iranian attack over the weekend. Gold was steady in early trading.

Main events this week:

• Germany ZEW survey expectations, Tuesday

• Start of the US housing market, industrial production, Tuesday

• Morgan Stanley, Bank of America earnings, Tuesday.

• Fed Vice Chairman Philip Jefferson speaks Tuesday

• BOE Governor Andrew Bailey speaks Tuesday

• The IMF will publish its latest global economic forecasts on Tuesday

• Eurozone CPI, Wednesday

• Fed releases its Beige Book on Wednesday

• Cleveland Fed President Loretta Mester speaks Wednesday

• Fed Governor Michelle Bowman speaks Wednesday

• BOE Governor Andrew Bailey speaks Wednesday

• Taiwan Semiconductor earnings, Thursday

• American Conf. Board leading index, existing home sales, initial unemployment claims, Thursday

• Fed Governor Michelle Bowman speaks Thursday

• New York Fed President John Williams will speak on Thursday

• Atlanta Fed President Raphael Bostic will speak on Thursday

• BOE Deputy Governor Dave Ramsden and ECB Governing Council Member Joachim Nagel speak on Friday

• Chicago Fed President Austan Goolsbee will speak on Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures fell 0.2% as of 11:57 a.m. Tokyo time

• Japan’s Topix fell 1.8%

• Australia’s S&P/ASX 200 fell 1.9%

• Hong Kong’s Hang Seng fell 1.4%

• The Shanghai Composite fell 1.3%

• Euro Stoxx 50 futures fell 1.2%

• Nasdaq 100 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.1% to $1.0610

• The Japanese yen was little changed at 154.31 per dollar

• The offshore yuan fell 0.2% to 7.2726 per dollar

• The Australian dollar fell 0.4% to $0.6417

Cryptocurrencies

• Bitcoin rose 0.4% to $63,387.55

• Ether rose 0.3% to $3,093.29

Bonds

• The yield on 10-year government bonds was little changed at 4.61%

• The Japanese ten-year yield rose by one basis point to 0.865%

• The Australian ten-year yield rose by five basis points to 4.31%

Raw materials

• West Texas Intermediate crude rose 0.9% to $86.14 a barrel

• Spot gold rose 0.2% to $2,387.19 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Zhu Lin.

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