By Kevin Buckland TOKYO (Reuters) – Asian stocks sank on Monday as bond yields rose as hot inflation rekindled worries about even more aggressive US interest rate hikes as new massive COVID-19 tests in China sparked more anxiety. . Rising expectations for Federal Reserve interest rate hikes have pushed the Japanese yen into a low of more than two decades against the dollar, raising more concerns from authorities about the sharp downward movement. MSCI Asia-Pacific Index fell 2.66%. The stock was expected to extend into US and European trades with futures falling 1.67%, falling 1.4% and slipping 0.77%. “It’s turning into Black Monday in Asia,” Jeffrey Haley, senior market analyst at OANDA, wrote in a customer note. “The word R (is) now on everyone ‘s lips” in the midst of a “struggle to reassess the Fed’ s expectations for hiking,” he wrote. The focus in Asia was on the threat of new COVID-19 lockdowns with Beijing’s most populous district, Chaoyang, announcing three rounds of mass testing to quell a “wild” COVID-19 epidemic that hit a bar. Shanghai conducted mass tests to limit a jump in cases that were tied in a hair salon. Chinese blue chips fell 1.42% and Hong Kong fell 3.29%. South Korea’s Kospi fell 3.03% and 3.27% fell. Australian markets were closed due to a holiday. “Anyone trying to take the bottom line in China’s growth and stock markets on the grounds that China was ‘one and the same’ in the lockdowns is naive,” said OANDA’s Halley. Shares of China Growth fell, with Hong Kong-listed tech giants falling 4.45%. Alibaba (NYSE :), Tencent and Meituan heavyweight companies fell between 4% and 6%. INFLATION IS CONCERNED In foreign exchange markets, the dollar climbed to 135.22 yen, the highest level since October 1998, boosted by rising bond yields that continued in Tokyo trading. The 10-year reached the ceiling of more than a month at 3.202%, placing it just one tenth of the base unit from the highest since November 2018. This put upward pressure on Japanese government bond yields, pushing the 10-year high to a six-year high of 0.255%, half a base point above the Bank of Japan’s 0.25% tolerance level under the yield curve control policy. This is happening even in the midst of the BOJ’s steady offer to buy unlimited amounts of the 10-year banknote from April. Violation of its ceiling prompted the central bank to announce an additional, unscheduled purchase transaction. The U.S. consumer price index rose more than expected 8.6% last month, the largest annual increase since December 1981, according to data from Friday. This dashed hopes that inflation had peaked and instead put markets on the alert that the Fed could tighten policy for too long and cause a sharp economic slowdown. The next political decision is on Wednesday. “Inflation data is changing the game forcing the Fed to move to higher speeds, stricter policies in advance,” Jefferies’s strategic analyst Aneta Markowska wrote in a research note, raising the call for this week’s decision to increase of 75 basis points. Markets are currently pricing an 80% chance of a half point increase and a 20% chance of a 75 basis point increase. Yields on the two-year bond, which is very sensitive to policy expectations, jumped up to 3.194% in Tokyo on Monday, for the first time since December 2007. The currency, which measures against six major bonds, including the yen, hit 104.58 for the first time in almost a month. The euro fell to $ 1.04755 for the first time since May 19. Top bitcoin cryptocurrency fell to its lowest level since December 2020 at $ 24,888.88. Meanwhile, futures fell $ 1.81, or 1.48%, to $ 120.20 a barrel and West Texas Intermediate crude was down $ 118.81 a barrel. $ 1.86 or 1.54%.
