Tom Westbrook

SINGAPORE (Reuters – Asian stock markets fell most in 2 weeks Monday due to concern over rapid U.S. interest rate increases and slow growth. The euro, however, gained support from Emmanuel Macron’s second term as French president.

MSCI’s Asia-Pacific broadest index, which excludes Japan, fell 1.6% to an all-time low of 6.4%. A nudge by authorities extended sharp losses for the. [CNY/]

fell 1.9%. The Hong Kong stock exchange fell by 3%. Futures and European futures fell 0.8%, while oil prices dropped by 0.8%. Oil fell 2.7%. [O/R]

The euro was generally steady at $1.0802 compared to broad dollar gains elsewhere. It also reached an almost 2-month high against struggling sterling.

Macron easily defeated a far-right challenge. He reassured the markets about France’s commitment for an integrated Europe and his economic platform, even though he will be relying on June’s parliamentary elections.

Vincent Mortier (chief investment officer, Amundi), Europe’s largest funds manager, stated, “The lack of a course change will reassure not just the other European Union states but also NATO.”

However, the news did not provide much relief for wider concerns about high inflation in general and possible rate increases that are likely to continue. This has been worsened by conflict in Ukraine and disruptions from coronavirus lockdowns in China.

U.S. share prices fell after Federal Reserve Chairman Jerome Powell stated that a 50 basis-point rate increase was possible at May’s meeting. St. Louis Fed President James Bullard suggested the possibility of 75 bp increases.

Candace Browning (NYSE: Head of Global Research at Bank of America) stated that “Concerns about rates and recession represent the greatest risks to investors”. She emphasized that demand is what matters most.

Investors worry about low-income customers’ ability to purchase because of the high gasoline and fuel prices.

The Treasury market remained steady, with the benchmark 10-year yield remaining at 2.8581% while the yield for the two-year term slid to 2.6399% from last week.

YUAN SLIDES

As concerns grow about the potential economic consequences of Shanghai’s shutdown, China has begun to impose severe restrictions on Beijing. More than 12 buildings were locked down.

China’s blue chip CSI 300 index has fallen to its lowest point since June 2020. Investors are still not impressed by government support for the slowing economy.

China’s middle onshore currency trading range was set at its lowest level for eight months Monday. The move was seen by officials as a nod to the recent fall in the yuan.

While the dollar rose in other countries, it was affected by trade restrictions caused by New Zealand public holidays and Australia. It fell 0.8% at $0.7185, and 0.4% at $0.6603.

The weak retail sales figures and sterling’s slide last week caused Sterling to fall 0.3% to an 18 month low of $1.2792 [GBP/]

Futures plunged 2.7%, hitting a 2-week low at $103.88/barrel. Futures dropped 2.6%, to $99.38/barrel.

Asia saw the decline of iron ore, but soybean oil rose following an Indonesian ban.

This week’s highlights include U.S. data on growth due Thursday and European inflation figures due Friday. There will also be a Bank of Japan monetary policy meeting on Friday.

The U.S. is expected to grow at 1.1% according to investors, which is slower than COVID-19’s recent rebound-juiced numbers, but should be strong enough to support rate increases.

Watch out for changes to economic projections and any indications of a response to the yen’s fall, which have fallen more than 10% within two months.

Just above the resistance, at $42,000