(Bloomberg) -- 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.
Meanwhile, Goldman Sachs Group Inc. economists downgraded their forecast for China's full-year expansion to 3% from 3.3%. The nation is hamstrung by a property crisis, rolling Covid curbs and lately stressed power supply.
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.
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.
"We do still anticipate there's going to be a lot of interest-rate volatility in the back half of the year, especially once markets start to perhaps acknowledge the fact that we might not necessarily see cuts in 2023 that are being priced in," Meera Pandit, global market strategist at JPMorgan Asset Management, said on Bloomberg Television.
Meanwhile, the US and Taiwan started formal negotiations on a bilateral trade initiative, a step which risks inflaming already high tensions with China.
Elsewhere, oil hovered around $88 a barrel, gold advanced and Bitcoin was little changed.
Inflation remains the most closely-watched indicator in the second half. Will it come down gradually, or will it stay elevated, forcing the Fed to keep raising rates aggressively? Have your say in the anonymous MLIV Pulse survey.
Here are some key events to watch this week:
U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
Fed's Esther George, Neel Kashkari speak at separate events, Thursday
Some of the main moves in markets:
S&P 500 futures fell 0.2% of 10:41 a.m. in Tokyo. The S&P 500 fell 0.7%
Nasdaq 100 futures dropped 0.2%. The Nasdaq 100 fell 1.2%
Japan's Topix index slid 0.8%
South Korea's Kospi index was down 0.6%
Hong Kong's Hang Seng index dipped 0.4%
China's Shanghai Composite index declined 0.3%
Australia's S&P/ASX 200 index lost 0.3%
Euro Stoxx 50 futures gained 0.2%
The Bloomberg Dollar Spot Index was steady
The euro was at $1.0188, up 0.1%
The Japanese yen was at 134.90 per dollar, up 0.1%
The offshore yuan was at 6.7926 per dollar, up 0.1%
The yield on 10-year Treasuries two basis points to 2.87%
Australia's 10-year bond yield advanced five basis points to 3.33%
West Texas Intermediate crude fell 0.1% to $88.09 a barrel
Gold was at $1,766.29 an ounce, up 0.3%
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