GLOBAL MARKETS DJIA 35368.47 -543.34 -1.51% Nasdaq 14506.90 -386.86 -2.60% S&P 500 4577.11 -85.74 -1.84% FTSE 100 7563.55 -47.68 -0.63% Nikkei Stock 27733.94 -523.31 -1.85% Hang Seng 24192.20 79.42 0.33% Kospi 2859.87 -4.37 -0.15% SGX Nifty* 18121.50 -17.0 -0.09% *Jan contract USD/JPY 114.65-66 +0.06 Range 114.78 114.55 EUR/USD 1.1322-25 -0.04 Range 1.1332 1.1319 CBOT Wheat March $7.690 per bushel Spot Gold $1,812.94/oz Unch. Nymex Crude (NY) $85.79 $1.97 US STOCKS
U.S. stock indexes fell and bond yields hit two-year highs as investors fretted over whether the Federal Reserve will raise interest rates more quickly and aggressively than expected.
Investors, coming off a holiday weekend that had closed markets on Monday, sold stocks and bonds across the board. All three indexes fell, with the S&P 500 sliding 1.8% and the Dow Jones Industrial Average shedding 1.5%. The Nasdaq Composite Index retreated 2.6%, leaving it close to entering a correction, or a drawdown of 10% or more, from a recent closing high.
"Markets are still trying to find a level for rate increases. It was only in October the market was expecting one rate hike for 2022 and now it's expecting four," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "That's reflecting the level of uncertainty we have in the market right now about the path of Fed policy."
Several financial companies have reported results showing profits have begun to ebb following a year in which many benefited from the tumultuous pandemic economy. Goldman Sachs was the latest to report, showing a decline in fourth-quarter profits, sending shares down 7% and acting as a major drag on the price-weighted Dow.
ASIAN STOCKS
Japanese stocks were lower, dragged by falls in auto and electronics stocks, as concerns persisted over the Fed's pace of potential rate increases. Investors are focusing on Covid-19 infection trends in Japan as the government considers steps that may limit restaurants' operating hours in Tokyo and several other prefectures. The Nikkei Stock Average was 1.4% lower at 27871.28.
South Korea's Kospi lost 0.7% to 2844.00 in early trade, tracking Wall Street's fall overnight. Tech and transport stocks led declines. Renewed concerns that the Federal Reserve will raise interest rates aggressively weighed on sentiment, sending USD/KRW 0.4% higher.
Hong Kong shares rose in early trade, with gains led by the property sector. The near-term upside for the local market may be limited by increases in U.S. Treasury yields, although Beijing's moderate loosening of monetary policy to stabilize growth should provide support, KGI Securities said. The Hang Seng Index added 0.1% to 24132.02, recovering after a three-session losing streak.
Chinese shares were broadly lower, tracking weakness in U.S. equities overnight that has extended to regional trading. IG said the risk-off mood in global markets has carried on into Asia's session as investors continue to price for more aggressive U.S. Fed tightening ahead. Traders are also weighing the implications of the PBOC's dovish tilt following rate cuts on Monday, and its pledge to act early and more forcefully to help stabilize the economy in 2022. The Shanghai Composite Index was flat at 3569.70, the Shenzhen Composite Index fell 0.3% to 2456.55, and the ChiNext Price Index was 1.0% lower at 3111.70.
FOREX
JPY weakened against most G-10 and Asian currencies on prospects that interest rates in Japan could stay low while those in other countries may rise. The Bank of Japan is unlikely to begin tightening monetary policy for the foreseeable future, despite flagging a change to its inflation risk assessment on Tuesday, CBA said. Hence, nominal U.S.-Japan rate differentials can support further USD/JPY gains, with CBA forecasting the currency pair to rise toward 120.50 by end-2022. USD/JPY edged 0.1% higher to 114.71, SGD/JPY was up 0.1% at 84.92 and AUD/JPY rose 0.1% to 82.45.
METALS
Gold was trading steadily, caught between higher U.S. Treasury yields and lingering safe-haven demand. This morning's rise in yields could weigh on prices of the nonyielding precious metal, while global economic risks posed by Covid-19's Omicron variant may support safe-haven buying of gold, analysts said. Spot gold was little changed at $1,812.94/oz.
OIL SUMMARY
Oil gained, amid geopolitical tensions after an attack on an Abu Dhabi oil facility by Iran-backed Houthi militants from Yemen. ANZ said Libya's deteriorating political stability has seen oil output suffer, while the likelihood of an Iran nuclear deal in the short term has diminished sharply. Meanwhile, global oil demand could remain resilient despite a global surge in cases of the highly transmissible Covid-19 Omicron variant, CBA said. "So far, OPEC has been correct in their assessment that the impact of the Omicron variant is projected to be mild and short?lived," CBA said. Front-month WTI rose 1.5% to $86.72/bbl, while Brent was 1.3% higher at $88.62/bbl.
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(END) Dow Jones Newswires
01-18-22 2215ET
