Asian stocks followed Wall Street lower and bond yields remained depressed on Thursday (13/10/2022) as investors weighed the risk of a global recession amid hawkish Federal Reserve rhetoric and uncertainty about the Bank of England's commitment to stabilizing markets.

Recession risks also fueled concerns about oil demand, with crude prices failing to recover from a 2% drop the previous day. The dollar held steady against major currencies as traders awaited U.S. consumer price data that could shed light on the pace of further Fed policy tightening.

Japan's Nikkei (.N225) fell 0.53%, while South Korea's Kospi (.KS11) dropped 1.18%. Hong Kong's Hang Seng (.HSI) dropped 1.02%, and mainland Chinese blue chips (.CSI300) dropped 0.64%. MSCI's broadest index of Asia-Pacific shares (.MIAP000000PUS) shed 0.54%, languishing near a 2 1/2-year low hit Wednesday. Benchmark Australian shares (.AXJO) were an outlier, rising 0.1%, supported by a big gain for Qantas (QAN.AX) after the airline said it expects to swing to a profit for the first half.

U.S. emini futures also offered some hope, rising 0.1% following a 0.33% drop in the S&P 500 (.SPX) overnight. Longer-term U.S. Treasury yields slumped near two-day lows, little changed at 3.9227% in Tokyo trading.

U.S. interest rates turned lower overnight after minutes from the Fed's latest policy meeting. Treasury yields turned lower after the minutes, reversing an earlier rise, with investors focused on Dovishness taking yields back from their highest levels in nearly two decades.

But Fed Governor Michelle Bowman took a hawkish stance in her speech on Wednesday, saying that if high inflation persists, she would continue to support aggressive interest rate hikes. Markets are pricing in a 90% chance of another 75 basis point rate hike in November, versus a 10% probability of a half-point hike. Investors’ immediate focus now is U.S. consumer price data due later in the day.

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