Asian Stocks Down Over Central Banks’ Hawkish Messages, JP Morgan Economy Warning

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By Gina Lee

Investing.com – Asia Pacific stocks were mostly down on Thursday morning, as central banks’ recent messages amplified a hawkish tone, and JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon issued a warning on the economy.

Japan’s Nikkei 225 edged down 0.18% by 10:41 PM ET (2:41 AM GMT) and South Korea’s KOSPI fell 0.86%.

In Australia, the S&P/ASX 200 fell 0.98%. Thursday’s data showed that exports grew 1%, while imports contracted 1% month-on-month, in April, and the trade balance was AUD10.495 billion ($7.54 billion). Australia also released retail sales data.

Hong Kong’s Hang Seng Index slid 1.38%.

China’s Shanghai Composite inched down 0.03% while the Shenzhen Component inched up 0.03%.

Investors also continue to digest the latest U.S. economic data. The manufacturing purchasing managers’ index (PMI) was 57 in May 2022, while the Institute of Supply Management (ISM) manufacturing employment index was 49.6, the ISM manufacturing PMI was 56.1 and the JOLTs jobs opening index was 11.4 million.

Benchmark 10-year U.S. Treasuries yields were around 2.90% after climbing overnight. Crude oil was down over a report Saudi Arabia will pump more oil if Russian output declines, and the Organization of the Petroleum Exporting Countries and allies (OPEC+) will meet later in the day.

Dimon warned investors to prepare for an economic “hurricane” but, in contrast, JPMorgan strategist Marko Kolanovic expects stocks to rebound by the end of 2022. It also underscores the debate as

Investors remain on edge over whether the Fed’s tighter monetary policies will lead to a recession, with a group of Fed policymakers falling behind calls to keep hiking to counter price pressures.

San Francisco Fed President Mary Daly and her colleague, St. Louis Fed President James Bullard, backed a plan to raise rates by 50 basis points in June 2022 at separate events. Richmond Fed President Thomas Barkin added it made “perfect sense” to tighten policy.

Cleveland Fed President Loretta Mester will discuss the economic outlook later in the day and the U.S. jobs report, including non-farm payrolls, will follow a day later.

“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,” Wells Fargo (NYSE:WFC) Investment Institute head of global asset allocation strategy Tracie McMillion told Bloomberg.

McMillion added 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.

Meanwhile, the Bank of Canada raised its overnight rate by a half percentage point to 1.5%, as per expectations, and warned that it could act “more forcefully” if needed to curb inflation. The United Nations’ Food and Agriculture Organization will also release its monthly food price index on Friday.