Equities Dipped, Treasuries Rose Weighing on Fed’s Bet on Inflation and Weakness in Chinese Economy

Asian equities edged down on Friday as investors weighed hawkish tone of Federal Reserves and weakness in the Chinese economy.

Shares in Mainland China close on a higher note while Hong Kong, Japan, Thailand and South Korea closed inched down in the red. The MSCI Asian Index ex Japan dipped by 0.68%.

U.S. futures contract – Nasdaq 100 and S&P 500 dropped signally more turbulence for equites.

Short dated treasury yield inched up while the dollar rose to its highest level.

Beijing urged country’s biggest investors to buy more stocks dip in an effort to step up confidence in the country’s  capital market.

The national securities regulatory issues the guidance on Thursday after meeting with investors including the country’s giant security fund at a time when the country’s benchmark index plunged almost the lowest in two years.

Chinese central bank is ready to provide more support to smaller business as country’s economic growth risks mounts, said Governor Yi Gang.

Meanwhile foreign investors are pulling out money from mainland shares as lockdown poses threat to economy growth and the yuan’s weakened against the dollar falls to multi-month lows. Foreigners offloaded 45 billion yuan ($7 billion) of shares onshore through the stock connect in March, the most in two years. Net outflows amounted to 6 billion yuan so far this month through Wednesday, according to data compiled by Bloomberg.

Fed chair Jerome Powell on Thursday cited minutes from last month’s policy meeting that said many officials had noted “one or more” 50 basis-point hikes could be appropriate to curb the hottest inflation in four decades. Investors are now betting on half-point increases in May, June and possibly July.

“The unknown is Powell’s ability to deliver the needed finesse without completely derailing the recovery, while not falling short of the required magnitude to anchor inflation,” Ian Lyngen, head of interest rate strategy at BMO Capital Markets, wrote in a note.

Crude oil inched down with WTI trading around $102 a barrel and Brent trading around $106 a barrel.