Stocks Set to Extend Tumble; Traders Await BOJ: Markets Wrap

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(Bloomberg) — Stocks are set to extend a selloff Friday on deepening fears of an economic downturn amid sharply tighter monetary policy around the world to tackle damaging inflation.

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Equity futures dropped more than 2% for Japan and Australia and were 1% lower for Hong Kong. US contracts stabilized after the S&P 500 closed at its lowest since December 2020 and the tech-heavy Nasdaq 100 shed 4%.

Treasuries caught a bid, supported by some soft US data including housing starts and building permits, lowering the 10-year yield to about 3.20%. Bitcoin fell below $21,000 in its longest slide in Bloomberg data going back to 2010.

The dollar, meanwhile, posted its biggest two-day drop since March 2020 as European central banks stepped up monetary tightening, heralding a narrower gap between rates there and in the US.

The Swiss franc surged Thursday after the nation’s monetary authority unexpectedly raised rates by 50 basis points. The pound also advanced after the Bank of England lifted borrowing costs.

In Japan, officials are expected to continue with monetary easing Friday. But speculation is growing that its central bank could join the likes of the SNB in buffeting markets with a policy surprise. The yen has strengthened about 1.5% versus the dollar this week.

Global stocks are headed for one of their worst weeks since the pandemic roiled markets back in 2020. That’s an indication of some of the pressure across a range of assets as rising rates suck liquidity from global markets.

Markets are back focused on “all of the half-empty things and how much narrower” the Fed’s scope is “in trying to stick a soft landing,” Carol Schleif, deputy chief investment officer at BMO Family Office LLC, said on Bloomberg Television.

Elsewhere, crude oil wavered as traders weighed the prospect of slower economic expansion against tight supplies. Gold trimmed a rally.

Key events this week:

  • Bank of Japan policy decision, Friday.

  • Eurozone CPI, Friday.

  • US Conference Board leading index, industrial production, Friday

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Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 7:18 a.m. in Tokyo. The S&P 500 fell 3.3%

  • Nasdaq 100 futures increased 0.3%. The Nasdaq 100 fell 4%

  • Nikkei 225 futures fell 2.7%

  • S&P/ASX 200 futures dropped 2.1%

  • Hang Seng futures declined 1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.8%

  • The euro was at $1.0554

  • The Japanese yen was at 132.35 per dollar

  • The offshore yuan was at 6.6869 per dollar

Bonds

Commodities

  • West Texas Intermediate crude was at $116.84 a barrel

  • Gold was at $1,853.12 an ounce

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