(Bloomberg) — Asian stocks pared losses early Thursday, continuing a streak of volatile trading as investors digested signals from central banks on the path of interest rates ahead.
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Benchmarks in Australia, South Korea, Taiwan and China fell, with tech giants among the hardest hit. A regional gauge of the technology sector fell about 2%, with stocks including SK Hynix Inc. down 4.8% and Taiwan Semiconductor Manufacturing Co. down 2.8%. That followed a 1.2% drop in the tech-heavy Nasdaq 100 index on Wednesday.
Japan’s Topix index rebounded from a 1.8% loss and the yen erased a 0.9% gain. A summary of the Bank of Japan’s views from last week, when it raised rates, showed one member identified the neutral rate at 1%, while another called for timely rate increases to avoid rapid hikes.
Global markets were roiled last week as investors braced for the U.S. and Japanese central banks to move in opposite directions, which would in turn undermine the yen’s role as a cheap source of funding for financial assets.
The carry trade unwind could still continue, but the slowing speed of the move is allowing investors to breathe “a sigh of relief,” according to Quincy Krosby of LPL Financial. “A weaker dollar, fueled by market perceptions that the Fed will soon begin an easing cycle, should help support a stronger yen, which is negative for the trade.”
According to strategists at JPMorgan Chase & Co, three-quarters of carry trades have been unwound as the recent crisis wiped out all positive returns since the start of the year.
The dollar weakened slightly on Thursday, reversing some of the previous session’s moves. Weak demand for a 10-year Treasury auction and $31.8 billion in corporate debt issuance were headwinds.
The Treasury auction result is “consistent with our view that we are on the verge of a continued correction higher in short-term yields,” said Zachary Griffiths, head of U.S. macro and investment grade strategy at CreditSights. “The repricing that followed what was really just a moderately weak jobs report seems way overblown.”
US Markets
The S&P 500 index closed down 0.8%, with Nvidia Corp. the biggest loser among mega-cap stocks. Super Micro Computer Inc. fell 20% on disappointing results. In late trading, Warner Bros. Discovery Inc., the parent of CNN and TNT, plunged after taking a $9.1 billion writedown of its traditional television networks.
Sony shares rose Thursday after the Japanese consumer electronics maker raised its full-year operating profit forecast.
Markets have been in free fall since weak economic data last week fueled concerns that the Federal Reserve’s decision to keep rates at their highest level in two decades risks triggering a deeper economic slowdown.
JPMorgan economists now estimate a 35% chance that the U.S. economy will tip into a recession by the end of the year, up from 25% earlier last month.
“Stocks remain vulnerable,” said Fawad Razaqzada of City Index and Forex.com. “More evidence of a bottom is needed for bulls to get excited again. Overall, sentiment remained cautious. Few were confident about buying on this latest dip, especially with US CPI looming next week.”
Oil rose as investors remained concerned about the possibility of Iran retaliating against Israel. Gold gained for the first time in six sessions.
Main events of the week:
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Industrial production in Germany, Thursday
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U.S. initial jobless claims on Thursday
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Fed Chairman Thomas Barkin Speaks Thursday
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China PPI, CPI, Friday
Some of the main movements in the markets:
Actions
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S&P 500 futures were little changed at 11:29 a.m. Tokyo time.
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Japan’s Topix rose 0.2%
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Australia’s S&P/ASX 200 index fell 0.3%
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Hong Kong’s Hang Seng Index fell 0.3%
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The Shanghai Composite Index fell 0.4%
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Euro Stoxx 50 futures fell 0.9%
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Nasdaq 100 futures rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0930.
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The Japanese yen was little changed at 146.65 per dollar.
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The offshore yuan was little changed at 7.1812 per dollar.
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The Australian dollar rose 0.3% to $0.6540
Cryptocurrencies
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Bitcoin rose 4.5% to $57,637.55
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Ether rose 4.8% to $2,463.01
Obligations
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The yield on 10-year Treasury notes fell two basis points to 3.92%
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Japan’s 10-year yield rose two basis points to 0.895%
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Australia’s 10-year yield rose two basis points to 4.09%.
Raw materials
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West Texas Intermediate crude oil rose 0.5% to $75.57 a barrel
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Spot gold rose 0.2% to $2,388.37 an ounce
This story was produced with assistance from Bloomberg Automation.
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