(Bloomberg) -- Stocks in Asia looked set for a cautious start on Friday as concerns about an economic slowdown bolster sovereign bonds.
Futures edged up for Japan and Australia, while S&P 500 and Nasdaq 100 contracts dipped after US shares posted their worst first half since 1970.
Hong Kong’s markets are closed for a holiday marking the 25th anniversary of Chinese rule. President Xi Jinping is expected to give a speech later Friday.
Chinese shares are one of the few bright spots in global markets, following a recent rally that’s taken the CSI 300 Index to the cusp of a bull market. Easing Covid curbs and brighter economic data have contributed to the rebound.
Treasury yields sank Thursday as softer than expected consumer spending and inflation bolstered the view that sharp Federal Reserve rate hikes will spark recession. The 10-year yield briefly fell below 3% before closing just above.
A gauge of the dollar retreated. Crude held losses on economic growth concerns. Bitcoin, emblematic of depressed sentiment, struggled below the closely-watched $20,000 level after its latest swoon.
Investors appear to be increasingly convinced that the global economy is set for a marked slowdown amid tightening monetary settings in much of the world to get high inflation under control.
“If anyone thinks that equities can rally into the back of the year, they are making the assumption that the Fed is going to let go of its entire focus on price stability and step back from that,” Seema Shah, chief strategist at Principal Global Investors, said on Bloomberg Television. “We have a very different view. We think things are going to get pretty tough.”
The latest US data showed inflation-adjusted personal spending shrank in May for the first time this year. Gains in the prior four months were revised down.
Traders expect another 75-basis-point Fed rate increase in July. Swaps referencing policy meeting dates price in a peak rate near 3.5% in March 2023 and a drop to about 3% by year-end.
What to watch this week:
- Eurozone CPI, Friday
- US construction spending, ISM Manufacturing, Friday
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Some of the main moves in markets:
- S&P 500 futures fell 0.4% as of 7:15 a.m. in Tokyo. The S&P 500 fell 0.9%.
- Nasdaq 100 futures lost 0.4%. The Nasdaq 100 fell 1.3%
- Nikkei 225 futures rose 0.2%
- Australia’s S&P/ASX 200 futures rose 0.2%
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro was at $1.0475
- The Japanese yen was at 135.77 per dollar
- The offshore yuan was at 6.6974 per dollar
- The yield on 10-year Treasuries declined eight basis points to 3.01%
- West Texas Intermediate crude was at $105.87 a barrel
- Gold was at $1,805.15 an ounce, down 0.1%
©2022 Bloomberg L.P.