Tom Westbrook

SINGAPORE (Reuters – Asia’s stockmarkets had difficulty sustaining recent gains in a fourth session. On Wednesday, the U.S. Dollar stabilized and nagging concerns about inflation and rate hikes crept back into global growth prospects.

MSCI’s Asia-Pacific share index, the broadest outside Japan, traded around flat in mid-morning after losing earlier gains. Although shares rose by 0.3%, Australian shares were up 0.7% thanks to miners.

Wall Street Indexes rose overnight, and the dollar sank from two-decade highs. This was because investors put inflation worries and fears of recession in the back of their heads.

However, analysts were skeptical that the trend would continue and U.S. stocks ran out of steam before Asian traders got them awakened. In the Asia session, stocks were 0.2% lower and Nasdaq futures 0.4%.

“Shares may have a further near term bounce after the plunge into last week,” stated Shane Oliver who is chief economist and head for investment strategy at Australia’s AMP (OTC) Capital.

“But, risks around inflation and monetary tightening as well as the war in Ukraine continue to be high, and point to greater downsides for share markets,” he stated.

The overnight kicking of the dollar by Australian workers data not meeting forecasts weakened it further.

While the dollar remained stable at $1.0536 against the euro, sterling’s strong rebound at $1.2480 was halted. At 103.370, the index was steady.

Analysts at Westpac stated that it was still too soon to predict a long-term peak in the dollar. Retracements should not be deep. They added that “but some two-way consolidation is probable near-term between 102 and104,” referring to dollar index.

NEGATIVE SHOCKS

A positive outlook had contributed to the mood in the immediate term, as U.S. retail sales exceeded expectations for an increase and industrial production beat forecasts.

On Wednesday, data showed that Japan’s quarterly was lower than expected by traders.

Shanghai’s lockdown is slowly ending, and China’s vice-premier gave reassuring comments to tech executives as the latest evidence of an ease in pressure.

Jerome Powell, Federal Reserve Chair, reminded us all that to manage inflation we need rates to rise and maybe some pain.

Investors are pricing in U.S. rate increases of 50 basis points for June and July. They expect the Fed funds benchmark rate to rise to 3% early next year.

In anticipation of rising rates Treasuries all tenors were purchased overnight. However, the gap between the yields of short-dated and longer-dated bonds narrows as the markets value the possibility that rate increases this year could slow down long-run growth. [US/]

In Asia, Benchmark 10-year Treasuries held steady and yielded just below 3.3% at 2.9805

As the European Central Bank increases rates 25 basis points per year, European yields rise. Klaas Knot from the Dutch Central Bank said that overnight, a higher rise is not impossible.

Commodities and stocks have rallied as the markets continue to expect growth. But oil dropped overnight, and Wednesday saw signs that momentum was slowing.

Futures were 0.3% higher at $112.29 per barrel, while futures rose 0.8% for $113.35 per barrel.

S&P Global (NYSE:) Ratings cut growth forecasts for China, the United States and the eurozone.

Chief economist Paul F. Gruenwald stated that “the global economy continues face an uncommonly large number negative shocks.”

He said that “Two events have altered the macro picture”, referring to Russia’s invasion in Ukraine, which caused commodity prices to spike and inflation which turned out be more widespread, wider, and persistent than originally thought.