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Marketmind: hello dark my old friend

Economy4 hours ago (Oct 16, 2022 04:10PM ET) Reuters. FILE PHOTO: A man walks past an electronic screen displaying Japan’s Nikkei share price index inside the Tokyo conference hall on June 14, 2022. REUTERS/Issei Kato

Marketmind: Hello darkness my old friend

Jamie McGeever

(Reuters) – Jamie McGeever

Looking ahead to Asian markets The broad market rally at the start of the quarter appears to have completely faded away.

Wall Street plummeted on Friday, 10-year Treasury yields soared above 4%, Fed implied terminal rate near 5%, dollar surged to new 32-year against yen Peaked near 150.00.

Asian markets could be hit hard on Monday.

It is increasingly clear that the Fed will not stop raising rates until it sees solid evidence that inflation is falling. It’s safe to say that the September inflation report was not what policymakers – or investors, businesses or households – had hoped for.

At the same time as the macroeconomic downturn, micro and market conditions are also deteriorating.

US Earnings Season This week, Tesla (NASDAQ: ), Johnson & Johnson (NYSE: ), Bank of America and Goldman Sachs are all in in the report. Analysts expect earnings per share growth for the broader index excluding energy to fall 2.6% in the third quarter, according to Refinitiv data.

Liquidity is worryingly low across a range of markets, particularly bonds. Analysts said the U.K. gilt market was in the spotlight, but even U.S. Treasuries might not be immune.

All in all, this is an extremely challenging backdrop for investors, even though many assets look very cheap. The problem is, they’re likely to get cheaper before there’s a recovery.

Asian markets had to digest all of this on Monday, as well as Chinese President Xi Jinping’s speech at the Communist Party Congress on Sunday, with a focus on security.

Meanwhile, this week’s regional data shows the release of Q3 GDP, unemployment, trade, house prices, foreign direct investment and interest rate decisions China, Japan inflation and Australia Minutes of the central bank meeting.

Major developments that could provide more direction for the market on Monday:

Korea trade

Japan Tertiary Industry Activity Index (August)

New York Fed Manufacturing Index (Oct)

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