(Bloomberg) -- Stocks in Asia fell Thursday as fresh concerns about the spread of Covid-19 from China unnerved investors, dragging US shares lower for a second day.
Australian and Japanese shares fell by about 1% and contracts for equity benchmarks in Singapore and Taiwan dropped. The S&P 500 slid 1.2% in thin trading to the lowest level in more than a month.
Australian and New Zealand 10-year government bond yields climbed. The 10-year Treasury yield and the dollar were steady after rising Wednesday.
Appetite for risk waned on news that the US would require inbound airline passengers from China to show a negative Covid-19 test prior to entry. In Italy, health officials said they would test arrivals from China and said almost half of passengers on two flights from China to Milan were found to have the virus.
The prospect of further pandemic disruption to fragile supply chains as central banks grapple to bring inflation under control damped sentiment in the final trading week of 2022 after a brutal year for financial markets. Global equities have lost a fifth of value, the largest decline since 2008 on an annual basis, and an index of global bonds has slumped 16%. The dollar has surged 7% and the US 10-year yield has jumped to above 3.80% from just 1.5% at the end of 2021.
Hong Kong removed limits on gatherings and testing for travelers in a further unwinding of its last major Covid rules, offering a boost to the global economy but sparking concerns it would amplify inflation pressures and prompt US policy makers to maintain tight monetary settings.
China’s reopening “complicates the Fed’s job with respect to putting a little bit of a bid under oil prices, putting a little bit of a bid under inflation globally, to aggregate demand. That’s going to be one of the biggest things that we’ll be watching in the first half,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute, on Bloomberg TV.
Data released Wednesday showed the Federal Reserve’s aggressive tightening policy has taken a toll on the housing market. US pending home sales fell for a sixth consecutive month in November to the second-lowest on record. Borrowing costs have roughly doubled since the start of the year and home sales have been declining for months.
Elsewhere in markets, oil dipped amid thin liquidity as investors weighed the fallout from a Russian ban on exports to buyers that adhere to a price cap.
“We expect the economy to slow materially or enter recession at some point in 2023,” wrote Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments.
“A severe recession would be bearish for stocks, yet given the resilience of the US economy and the tight labor market, we are expecting a slowdown or shallow and brief recession. That could allow stocks to rally in the second half of 2023,” she said.
Key events this week:
- US initial jobless claims, Thursday
- ECB publishes economic bulletin, Thursday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:30 a.m. Tokyo time. The S&P 500 fell 1.2%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 1.3%
- Hang Seng futures fell 1.9%
- Japan’s Topix fell 1.4%
- Australia’s S&P/ASX 200 fell 1.1%
- Euro Stoxx 50 futures fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0625
- The Japanese yen rose 0.3% to 134.10 per dollar
- The offshore yuan was little changed at 6.9918 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to $16,547.15
- Ether rose 0.2% to $1,189.09
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.86%
- Japan’s 10-year yield was little changed at 0.46%
- Australia’s 10-year yield advanced four basis points to 4.07%
Commodities
- West Texas Intermediate crude fell 0.6% to $78.45 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
©2022 Bloomberg L.P.
Stocks Sink on Fresh Covid Threat to World Economy: Markets Wrap - BNN Bloomberg
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