Asian stocks decline ahead of expected Fed hike: markets wrap

Stocks in Asia opened lower after US shares declined and Treasury yields held near multi-year highs as investors positioned for a hefty interest rate hike from a hawkish Federal Reserve.
Equities fell in Japan, Hong Kong and Australia after the S&P 500 Index dropped more than 10% below the August high marking the peak of its rally from this year’s low. US contracts fluctuated and European stock futures fell.
Two-year Treasury yields inched back from close to 4% as traders weigh the risk that monetary tightening will push the economy into recession. The Bank of Japan announced an unscheduled bond-purchase operation as it seeks to cap upward pressure on yields before a policy decision later this week.
A dollar gauge traded near a record high amid the market jitters while bitcoin remained under pressure below the $19,000 level.
Fed officials are about to put numbers on the “pain” they’ve been warning of when the central bank publishes new economic projections on Wednesday. They’re expected to hike by 75 basis points again, according to the vast majority of analysts surveyed by Bloomberg. Only two project a 100 basis points move.
“Volumes remain light and the mood cautious, with few looking to take on large positions before hearing what the Fed says and where policy makers see rates going by the end of the hiking cycle,” said Fiona Cincotta, senior financial markets analyst at City Index. “This is what will drive the markets, not the rate hike tomorrow, but what the Fed plans to do next.”
Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession occurring at the end of 2022 that could last all of 2023 and a sharp correction in the S&P 500. “Even in a plain vanilla recession, the S&P 500 can fall by 30%,” said the chairman of Roubini Macro Associates. In “a real hard landing”, which he expects, it could fall 40%.
Still, some professional speculators are refusing to surrender to a punishing equity market prone to volatility – boosting bullish and bearish positions at the fastest rate in five years. As the S&P 500 plunged last week, hedge funds snapped up single stocks while betting against the broad market with products like exchange-traded funds, data from Goldman Sachs Group’s prime brokerage show.
Elsewhere in markets, oil fell below $84 a barrel and gold was steady. BM