(Bloomberg) -- Stocks in Asia fell Thursday as central bankers amplify hawkish messages in their quest to rein in inflation and JPMorgan Chase & Co.'s Jamie Dimon sounded alarm bells on the economy.
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An MSCI Inc. gauge of Asia-Pacific shares retreated for a second day, with equities in Hong Kong and Japan sliding. US contracts fluctuated after stocks dropped on Wall Street. Data showed an unexpected advance in US manufacturing activity as well as exceptionally high job openings, fueling concern the Federal Reserve will need to get more restrictive to slow runaway price gains.
The yield on 10-year Treasuries was around 2.90% after spiking overnight. Traders raised bets on the path for rate hikes and the Fed started its balance-sheet reduction process. The dollar was little changed. Crude oil declined on a report Saudi Arabia is ready to pump more oil if Russian output declines. OPEC+ is scheduled to meet to discuss supply policy.
Dimon warned investors to prepare for an economic "hurricane." In contrast, JPMorgan's bullish strategist Marko Kolanovic expects stocks to rebound by the end of the year, underscoring the increasing debate as markets are buffeted by challenges from tightening monetary policy to the war in Ukraine.
Investors are on edge over whether the Fed's tighter policies will induce a recession. A chorus of Fed officials has fallen behind calls to keep hiking to counter price pressures. Mary Daly of the San Francisco Fed and her more hawkish colleague James Bullard of St. Louis both backed a plan to raise rates by 50 basis points this month, while Richmond's Thomas Barkin said it made "perfect sense" to tighten policy.
"We do see the rise in probability of a recession in the second half of this year, potentially persisting into 2023 as the Fed continues to battle inflation," Tracie McMillion, Wells Fargo Investment Institute head of global asset allocation strategy, said on Bloomberg Television.
McMillion also cautioned that markets haven't fully priced in the impact of the Fed's balance-sheet reduction. "The impact of quantitative tightening starting to roll off the Fed's balance sheet this month is really untested and unprecedented. Our guess is that it's probably not fully priced into markets," she said.
Elsewhere, the Bank of Canada raised its overnight rate by a half percentage point, as expected, and warned that it may act "more forcefully" if needed to tackle inflation.
How will markets be affected by the Fed's quantitative tightening? QT officially starts Wednesday and is the theme of this week's MLIV Pulse survey. Click here to participate anonymously.
Here are some key events to watch this week:
Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
US May employment report Friday
The UN's Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday
Some of the main moves in markets:
S&P 500 futures rose 0.1% as of 10:28 a.m. in Tokyo. The S&P 500 fell 0.7%
Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.7%
Topix index fell 0.7%
Australia's S&P/ASX 200 Index fell 1%
Kospi index lost 0.9%
Hang Seng Index fell 1.1%
Shanghai Composite Index fell 0.4%
Euro Stoxx 50 futures rose 0.3%
The Bloomberg Dollar Spot Index was little changed
The Japanese yen was at 130.08 per dollar
The offshore yuan was at 6.7062
The euro was at $1.0651
The yield on 10-year Treasuries rose one basis point to 2.91%
Australia's 10-year bond yield climbed nine basis points to 3.51%
West Texas Intermediate crude slid 2.4% to $112.49 a barrel
Gold was at $1,845.99 an ounce
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