Asian stocks hit a two-year low on Friday and were heading for a weekly loss; while it set the dollar for its third week of gains as a fresh slew of rate hikes around the world deepened concerns about the outlook for global economic growth.
Although wagers on a 100 basis point hike from the U.S. Federal Reserve later this month eased off a little overnight as Fed officials hosed down that possibility; bond markets remain priced for steep hikes to slam the brakes on output.
China’s economy contracted sharply in the second quarter data released; while annual growth also slowed significantly, highlighting the colossal toll on activity from widespread COVID lockdowns; which jolted industrial production and consumer spending.
China’s main share index (.SSEC) was flat, while a Hong Kong-listed index of mainland property stocks fell more than 2%. Overnight, Wall Street indexes fell after weaker-than-expected earnings from JPMorgan Chase & Co and Morgan Stanley fanned fears of a sharp economic downturn.
Futures imply about a 30% chance of a 100 bp hike and see the benchmark U.S. interest rate reaching about 3.6%; by March next year before being cut back to 3% by late 2023. Weakness will further worry investors who think this week’s white-hot inflation figure;and subsequent data showing a strong rise in producer prices point to an unleashing of steep rate rises on a softening economy.
This reflects concerns that China will struggle to meet its growth targets this year; when the market is concerned about recession risks for Europe and the U.S.”. Brent crude futures held at $99.42 a barrel and gold sat at $1,711 an ounce, just above a one-year low overnight.