Stocks were headed for a weekly loss on Friday as investors became concerned about the likelihood of aggressive global rate hikes, while bonds sank and the dollar appeared to be on track for its best week in a month.
In morning trade, MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) was unchanged, down nearly 1.5 percent for the week. The Nikkei (.N225) in Japan lost 0.2 percent on Friday, putting it on track for a weekly loss of about 3%.
A late surge raised Wall Street indexes somewhat, but they are still down for the week, led by the rates-sensitive Nasdaq, which is down 2.5 percent (.IXIC). Futures in the United States were unchanged.
Meeting minutes and remarks from Fed members this week revealed that policymakers are ready to begin reducing the central bank’s asset holdings in May and are prepared to raise rates 50 basis points at a time to combat inflation.
The war in Ukraine, which has sent shockwaves through commodities prices, as well as lingering supply chain damage from the pandemic, has put even more pressure on consumer pricing, contributing to the perception of a huge shift in patterns.
“Combine those… and equities risk premium has to go up, regardless of which market,” said Lirong Xu, chief investment officer at Franklin Templeton Sealand Fund Management in Shanghai. “And interest rates aren’t going to fall any lower.”
“Low inflation and a largely tranquil globe have characterized the last two decades. Geopolitical disputes are likely to become more turbulent in the future, with a greater impact on the global economy.”
The possibility of a populist shock in the French presidential elections has caused market concerns, driving down French debt and the euro ahead of Sunday’s first round of voting.
Opinion surveys show that a victory for far-right leader Marine Le Pen against incumbent Emmanuel Macron is now within the margins of error, and the euro fell to a one-month low of $1.0858 in morning trade.