Overnight Market Wrap: 27 September 2022

Overnight Market Wrap: 27 September 2022

Key Points:

  • Dollar Rally Pauses, Stocks Mixed in Relative Calm
  • Greenback still near fresh record; investors remain on edge
  • Bond yields stick at elevated levels amid rate-hike fears

Asian markets traded on a cautious note Tuesday following another selloff in US stocks, soaring bond yields and volatile currency markets as investors brace for a heightened risk of global recession.

A gauge of the region’s equities held a slight gain as shares edged higher in Japan and Australia and were mixed in Hong Kong and China. US equity contracts rose after the S&P 500 closed at its lowest since 2020 and the Cboe Volatility Index spiked past 30, a level it hasn’t closed above since June. 

Bonds remained under pressure in Australia and Japan, while the benchmark 10-year Treasury yield held near 3.9% — a level last seen in 2010.

The Bank of Japan announced an unscheduled bond buying operation across a wide range of maturities after the country’s 20-year bond yields rose to the highest level since 2015 as global debt markets come under pressure from expectations for further monetary tightening.

The dollar gauge inched back from a record high Monday, when Federal Reserve officials repeated hawkish comments on policy. Asian currencies including the yen and yuan strengthened slightly while staying around levels that have caused concern from authorities in Japan and China.

BOJ Governor Haruhiko Kuroda said Monday that Japan’s intervention in the currency market was appropriate given recent volatility in the yen. Japan spent about 3 trillion yen ($21 billion) on its action, Nikkei reported. 

The pound made a small advance following its drop to a record low Monday. The Bank of England said it may not act before November to stem a rout, leaving traders wary of the risk that the currency could drop to parity with the dollar.  

Negative sentiment is also flowing into markets for energy and raw materials. West Texas Intermediate crude oil traded around $77 a barrel near its January.

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