Asian stocks and currencies plummet in broad sell-off: Markets join in

(Bloomberg) — Asian stocks and currencies tumbled as signs of waning momentum in China’s economy fueled fears about high U.S. interest rates and tensions in the Middle East.

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The MSCI Asia Pacific Index fell the most since August, with every major market posting losses, after a slew of China’s economic indicators showed the country’s economic recovery remains patchy. Futures contracts for US and European shares fell in Asian trading after the S&P 500 fell more than 1% in a volatile session overnight following robust retail selling.

A global gauge of emerging market currencies fell, with the South Korean won and Indonesian rupiah weakening to multi-year lows. Traders also blamed the yuan’s fall for a sell-off across the region, after China unexpectedly weakened its defenses as a resurgent dollar and poor sentiment pushed the country toward a policy redline.

“The carnage is the result of a perfect storm: stretched positioning across global stock indices, a third straight month of strong US inflation data adding to unrest in a deeply troubled bond market against rising risk of miscalculation and escalation in the Middle East -East.” says Tony Sycamore, market analyst at IG Australia.

A slew of China’s economic data points show that the country’s economic recovery remains uneven. While both gross domestic product and fixed capital formation exceeded expectations, data on retail sales and industrial production fell short of expectations.

“Chinese data looks strong in the headlines, but the details are weak,” said Charu Chanana, head of currency strategy at Saxo Markets in Singapore. “This could indicate that the economy needs more support, and markets will continue to position for a weak yuan.”

A gauge for the dollar climbed to its highest level since November. The currency’s resurgent strength, driven by demand for safe havens amid rising geopolitical tensions in the Middle East, wreaked havoc across Asia.

The Indonesian rupiah fell above 16,000 per dollar for the first time since 2020, prompting the country’s central bank to intervene. The South Korean won fell to its lowest level since 2022, while the Indian rupee fell to a record low against the dollar.

The Japanese yen remained under pressure after rising to a new 34-year low against the dollar overnight.

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West Texas Intermediate rose in Asia after regaining the $85 mark on Monday. Top Israeli officials reiterated that the country has no choice but to respond to the Iranian attack over the weekend. Gold was stable.

Government bonds were steady in Asian trading after 10-year yields spiked on Monday, while two-year yields were near 5%. Bonds also came under pressure as JPMorgan Chase & Co. and Wells Fargo & Co. entered the US high-quality bond market, the first in a likely parade of bond sales by banks following the results.

U.S. retail sales rose more than forecast in March and were revised upwards last month, showing resilient consumer demand that continues to fuel a surprisingly strong economy. As long as a robust labor market supports household demand, there is a risk that inflation will become entrenched.

Main events this week:

• Germany ZEW survey expectations, Tuesday

• Start of the US housing market, industrial production, Tuesday

• Morgan Stanley, Bank of America earnings, Tuesday.

• Fed Vice Chairman Philip Jefferson speaks Tuesday

• BOE Governor Andrew Bailey speaks Tuesday

• The IMF will publish its latest global economic forecasts on Tuesday

• Eurozone CPI, Wednesday

• Fed releases its Beige Book on Wednesday

• Cleveland Fed President Loretta Mester speaks Wednesday

• Fed Governor Michelle Bowman speaks Wednesday

• BOE Governor Andrew Bailey speaks Wednesday

• Taiwan Semiconductor earnings, Thursday

• American Conf. Board leading index, existing home sales, initial unemployment claims, Thursday

• Fed Governor Michelle Bowman speaks Thursday

• New York Fed President John Williams will speak on Thursday

• Atlanta Fed President Raphael Bostic will speak on Thursday

• BOE Deputy Governor Dave Ramsden and ECB Governing Council Member Joachim Nagel speak on Friday

• Chicago Fed President Austan Goolsbee will speak on Friday

Some of the major moves in the markets:

Shares

• S&P 500 futures fell 0.2% as of 1:24 p.m. Tokyo time

• Nasdaq 100 futures fell 0.2%

• Japan’s Topix fell 2.1%

• Australia’s S&P/ASX 200 fell 2.1%

• Hong Kong’s Hang Seng fell 1.9%

• The Shanghai Composite fell 1.4%

• Euro Stoxx 50 futures fell 1.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.1% to $1.0612

• The Japanese yen was little changed at 154.31 per dollar

• The offshore yuan fell 0.2% to 7.2723 per dollar

Cryptocurrencies

• Bitcoin fell 1% to $62,552.01

• Ether fell 1.4% to $3,040.69

Bonds

Raw materials

• West Texas Intermediate crude rose 0.6% to $85.93 a barrel

• Spot gold rose 0.1% to $2,386.50 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Zhu Lin.

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