Tom Westbrook

SINGAPORE, (Reuters) – Stocks dropped and the dollar held steady on Thursday due to data showing that U.S. inflation was persistently high. Investors are concerned about the economic impact of aggressive interest rates hikes to control it.

U.S. stock markets swung after the news but closed sharply lower. The Asian session was bumpy and saw 0.5% growth. Although foreign exchange trading was volatile too, it is still within the range of two decades.

The MSCI Asia-Pacific share index outside Japan was 1% down. It fell by 1%

It was priced below $30,000 Thursday. Nursing suffered from almost 27% loss that saw it drop $11,000 in just a week.

In the twelve-months to April, consumer prices in Headline U.S. rose 8.3%. This was slower than the 8.5% rate a month ago and raises hopes that price increases have halted. The rate was higher than 8.1% forecasted by the market, which reaffirms concerns that interest rates must rise rapidly to control it.

“We’re very embedded now with at least two more hikes of fifty basis points on our agenda. Damian Rooney from brokerage Argonaut, Perth director of institutional sales said that this is the end for free money in equity markets.

His comments were a reflection of his belief that the U.S. stock market surged six months earlier on the back of hopes and prayers, but then the markets suddenly reverted to reality.

Apple shares (NASDAQ 🙂 dropped 5% overnight, taking the Nasdaq down 3.2% and Apple down 1.65%.

In the wake of data, short-dated Treasuries were sold. However, the longer curve rallied because investors worried about steep rate increases that would slow down growth.

Overnight, the benchmark dropped six basis points (bps), and fell four more bps to 2.8877% in Tokyo trade. This has flattened the yield curve by closing the gap between 10-year and 2-year yields.

Jan Nevruzi (NatWest Markets U.S. Rates Strategist) stated that “there should be a tipping factor in how far Fed can be pressed prior to odds clearly point towards an hard landing.”

SELL IN MAY

Nasdaq fell nearly 8 percent in May and is now down more than 25% for the year. This comes as a result of higher U.S. yields drawing money from high-priced tech stocks.

Markets for cryptocurrency are also eroding, highlighted by the demise of TerraUSD, a stablecoin.

Investor confidence is also being affected by a weakening global growth picture. The threat of war in Ukraine and the lengthening lockdowns China add to supply chain chaos.

Sunac China, a property developer, said that it had missed an interest payment on a bond and would miss even more as China’s real estate industry remains under the thumb of credit crunch.

Uncertainty about almost all things, including U.S. rate increases has helped the dollar. The dollar held the euro at $1.0524, near its recent lows. It hovered above 129.78yen on Thursday while other trade-sensitive currencies were squeezed.

The Australian currency was volatile following the release of U.S. Inflation data. However, it was unable hold its ground over $0.70.

Sterling dropped to $1.2230 after two years of decline. This was due to a deepening stand-off regarding post-Brexit Northern Ireland trade rules.

Hong Kong Monetary Authority spent $202 Million on Thursday in support of the Hong Kong Dollar, which was weaker than its peg against the greenback.

Oil prices stabilized following a Wednesday surge, prompted by concerns over westbound gas flow from Russia to Europe.

Futures were 0.7% less at $106.78/barrel and 0.6% lower for $105.07/barrel.

British growth and activity data will be available later today.