Asian stocks fall, recession risks hard to avoid By Reuters

From Wayne Cole

SYDNEY (Reuters) – Asian stocks fell on Monday, with Wall Street futures gaining slight gains amid worries that the US Federal Reserve will underscore its commitment this week to fighting inflation with whatever interest rates are needed.

The euro reacted weakly after French President Emmanuel Macron lost control of the National Assembly in Sunday’s legislative election, a major obstacle that could put the country in a political stalemate.

Trading with the United States on holiday was confused, and Nasdaq futures enjoyed a session to rise by 0.3%, while strengthening by 0.2%. EUROSTOXX 50 futures fell 0.3% and futures fell 0.2%.

It fell nearly 6% last week to trade 24% below its January high. Analysts from BofA noted that this is the 20th bear market in the last 140 years and the average decline from the peak to the lowest was 37.3%.

Investors will hope that this does not correspond to the average duration of 289 days, given that it will not end until October 2022.

The broadest index of Asia-Pacific stocks outside Japan lost 0.4% to MSCI and 1.2% to Tokyo.

China’s blue chips rose 0.5 percent, possibly backed by news that President Joe Biden was considering removing some tariffs on China.

There are fears over the markets that the big central banks will have to tighten so aggressively in order to curb rapid inflation that they will lead the world into recession.

“Market volatility remains high, with the highest weekly close since late April, a topic that exceeds stocks with a jump in exchange rates and measures volatility along with wider credit spreads,” said Rodrigo Catril, a strategist at NAB.

“At this stage, it is difficult to see a turnaround in wealth until we see evidence of material easing of inflationary pressures.

Relief seems unlikely this week, as UK inflation data is expected to show another alarmingly high reading, which could cause the Bank of England to grow faster.

FED STANDS UNCONDITIONALLY

A group of central bankers are also on the calendar of speeches this week, led by a likely hawk testimony from Federal Reserve Chairman Jerome Powell to the House of Representatives on Wednesday and Thursday.

Last week, the Fed promised that its commitment to curb inflation was “unconditional”, while Fed chief Christopher Waller said on Saturday that he would support a new increase of 75 basis points in July.

“With a rapid slowdown in growth and the Fed committed to restoring price stability, we believe a slight recession beginning in the fourth quarter is now more likely than not,” warned analysts at Nomura.

“Financial conditions are likely to tighten further, consumers are experiencing significant negative mood shocks, energy and food disruptions have worsened and external growth prospects have deteriorated.

The hawk’s forecast keeps the dollar at 104,420 and close to the two-decade high of 105,790 last week.

The euro was slightly stronger after the French election at $ 1.0524, but still uncomfortably close to last week’s low at $ 1.0357.

The yen remained under widespread pressure as the Bank of Japan stubbornly adhered to its super-easy policies, even as all of its partners in developed countries took steps to tighten. The dollar was stable at 134.98 yen, reaching its highest level since 1998 last week.

fell 3% to $ 19,897 after rebounding sharply over the weekend amid talks about a major buyer.

The strength of the dollar has kept gold in a tight side pattern for the past month or so, and it was last stuck at $ 1,841 an ounce. [GOL/]

Oil prices fell again after a sharp retreat late last week amid fears that high energy prices are increasing the risks of a global recession that will eventually curb demand. [O/R]

fell 10 cents to $ 113.02 while losing 27 cents to $ 109.29 a barrel.