Tom Westbrook

SINGAPORE (Reuters – The prospect of aggressive global rates hikes starting to rattle investors on Friday sent stocks plunging. Meanwhile, bonds plummeted and the dollar was poised for its highest week in a month.

MSCI’s Asia-Pacific broadest index, which excludes Japan, was unchanged in morning trade. It has fallen about 1.5% over the past week. The weekly drop of almost 3% was recorded on Friday as the index fell 0.2%.

Wall Street indexes had been modestly lifted after a late rally but are still down due to the 2.5% rate-sensitive Nasdaq loss. U.S. futures were flat.

Federal Reserve policymakers have indicated that they are willing to reduce central bank asset holdings starting in May. They are also prepared to raise rates by 50 basis points at any time, to control inflation. This was evident from meeting minutes and comments from officials.

The shockwave caused by the war in Ukraine has pushed commodity prices higher, and lingering effects from the pandemic on supply chain have put more pressure on prices. This has created a feeling of major trends shifts.

LirongXu is chief investment officer of Franklin Templeton Sealand Fund Management, Shanghai. “Moreover, interest rates are not expected to fall further.”

“The past two decades have brought about low inflation, and relatively stable world. Moving forward, geopolitical disputes may become increasingly volatile and have a greater impact on the entire world’s economy.

Market jitters have also been caused by the risk of populist upheaval in French presidential elections – which has dragged on French debt as well as the euro ahead of Sunday’s first round of voting.

While a victory for Marine Le Pen, far-right leader, over incumbent Emmanuel Macron is unlikely, it’s now possible, according to opinion polls. In morning trade, euro traded at $1.085858, a new low.

As traders fear the Fed’s decision to reduce bond holdings, long-end Treasuries in other countries have been hit the hardest.

The benchmark rose 25 basis points (bps), to 2.6409%, this week. This was consistent in Asia trading on Friday. The yield on the 30-year bond is now up 22 basis points.

U.S. Dollar has been the principal beneficiary. The, which measures greenbacks against six other major currencies, hit a two-year peak of 99.904 Friday.

An oil price increase and supplies being released from reserve has pushed the dollar higher and reduced pressure on commodity currencies. Japan’s currency has fallen to its lowest point in years. It was currently trading at 124.23 USD.

Futures were stable at $100.56/barrel and held steady at $96.17 [O/R]

There were some positives, too. Australia’s equity market was stable for the week. European futures posted gains of 0.8% on Friday.

Clara Cheong of J.P. Morgan Asset Management in Singapore said, “A higher-rate environment that occurs through the hiking cycle can continue to benefit value and growth equities”