Key Points:
- Stocks Drop, Treasuries Up as China Risks Sap Mood
- Fed minutes showed officials saw eventual need to slow hikes
- Goldman’s China growth downgrade points to economic struggles
Asian stocks fell and Treasuries rose amid a parlous Chinese economic outlook and Federal Reserve minutes signaling officials face a delicate balancing act to quell inflation while averting recession.
Losses in Japan, China and Hong Kong weighed on an Asian equity gauge. US contracts dipped after Wall Street shares declined for the first time in four days, including a more than 1% drop in the tech-heavy Nasdaq 100 index.
Fed officials saw a need to eventually dial back the pace of interest-rate increases and warned against over-tightening that could hurt the economy, but also flagged the risk of inflation pressures becoming entrenched.
The advance in Treasuries lowered the 10-year yield to about 2.87%. A dollar gauge was steady. Australia’s currency weakened following an unexpected tumble in employment numbers.
Elsewhere, oil hovered around $88 a barrel, gold advanced and Bitcoin was little changed.
Swaps tied to Fed policy meeting dates indicated lower odds of a 75 basis points hike next month as opposed to a half-point move. Expectations of slower policy tightening and a pivot to cuts later next year have already contributed to a 12% jump in global stocks from June lows. The question is whether that’s too optimistic. A darker scenario is of persistent price pressures forcing restrictive borrowing costs even as the economy shrinks.