HONG KONG- Asian markets attempted to stabilize on Tuesday after a wild few days of stumbling stocks, crumbling bonds, a plunging pound and soaring dollar, with the dollar easing a bit and stocks flat.
Sterling, which collapsed to a record low $1.0327 on Monday, recovered to $1.0742. S&P 500 futures rose 0.7 percent, and MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent. Japan’s Nikkei rose 0.7 percent.
Analysts were doubtful about the outlook, however, as markets – already jittery at the prospect of US interest rates staying higher for longer – have been further unnerved by an upheaval in British assets in response to government spending plans.
Britain plans tax cuts on top of huge energy subsidies, and a lack of confidence in the strategy and its funding hammered gilts and the pound on Friday and again on Monday.
The yield on five-year gilts is up a stunning 100 basis points in two trading days.
“(It) is definitely something that’s unfolding…probably we’re only at a certain initial stage of seeing how the market digests that kind of information,” said Yuting Shao, macro strategist at State Street Global Markets.
“Of course the tax cut plan itself was really aimed to stimulate growth, reduce household burdens, but it does raise the question of what the implications are in terms of the monetary policies.”
After the pound’s plunge, the Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely”.
Spillover to US markets drove Wall Street deeper into a bear market, lifted benchmark 10-year Treasury yields more than 20 bps to a 12-year high of 3.933 percent, and has kept the greenback bid.
After two weeks of mostly steady losses on the US stock market, the Dow Jones Industrial Average confirmed on Monday that it was in a bear market, tracing its start to declines in early January. “‘ Reuters