Asian stocks fell and the dollar held on Monday ahead of a week filled with no less than a dozen central bank meetings, underlined by the Federal Reserve which is expected to take another step towards reduction. The holidays in Japan, China and South Korea created lean conditions, and politics added further uncertainty with elections in Canada and Germany ending the week.
The fate of Chinese real estate giant Evergrande, and its $ 300 billion in liabilities, is also at stake with a bond interest payment due Thursday.
Concerns about the health of the Chinese economy and Beijing’s crackdown on tech companies continue to haunt the region, with Hong Kong stocks slipping more than 3% to their lowest level in nearly 11 months.
The MSCI’s largest Asia-Pacific stock index outside of Japan fell another 1.4%, after losing 2.5% last week, with Australia losing 1.5%.
Japan’s Nikkei was closed, but futures were 400 points lower on Friday’s liquidity close. The market would need to consolidate after hitting 30-year highs in hopes that a new prime minister will bring more stimulus and policy change.
Nasdaq futures fell 0.5% and S&P 500 futures fell 0.3%, with Wall Street ending last week on a soft note after disappointing confidence data of American consumers.
The Fed is still expected to set the stage for a cut at its policy meeting on Tuesday and Wednesday, although the consensus is that an actual announcement will be delayed until the November or December meetings.
Yields on 10-year Treasuries hit a two-month high and the curve flattened ahead of the meeting.[US/]
“A flatter yield curve suggests some fears that the Fed may exaggerate the eventual upward cycle,” warned Tapas Strickland, director of economics at NAB.
He noted that only 2-3 FOMC members would need to change their dot plot forecast for an increase in 2022 to make it the median, given that seven of the 18 members had already announced a decision next year.
“The Fed will also have points for 2024 that will give an indication of the steepness of the potential hiking cycle.”
Market consensus calls for two hikes in 2023 and four in 2024, with the longer-term fed funds rate at 2.125%.
The central banks of the EU, Japan, UK, Switzerland, Sweden, Norway, Indonesia, Philippines, Taiwan, Brazil, South Africa, Turkey and Hungary all have meetings this week.
Norges Bank is expected to be the first in the G10 to raise interest rates.
The rise in US yields combined with a general risk aversion in favor of the dollar, which was up near a one-month high of 93.303 on a basket of currencies.
The stronger dollar weighed on gold, which was pinned at 1,749 an ounce after losing 1.9% last week.
Oil prices fell as energy companies in the Gulf of Mexico in the United States restarted production after consecutive hurricanes in the region halted production.
Brent lost 54 cents to 74.80 a barrel, while US crude lost 57 cents to $ 71.40.