Hong Kong equities led declines, with notable weakness in tech companies, and Japanese shares were also decisively lower. Futures for the S&P 500 fell after the benchmark closed down 1.6% on Wednesday, the biggest decline in a month. 

The retreat for Japanese indexes also reflected upward pressure on the nation’s currency after the central bank left policy settings unchanged on Wednesday. 

Traders were again focused on the benchmark 10-year Japanese government bond yield amid expectations that it may start creeping back towards the target ceiling of 0.5% after a sharp drop on Wednesday. It was at 0.415% mid-morning in Tokyo.

The yen resumed its advance after being whipsawed over the past 24 hours. A gauge of dollar strength edged higher.

New Zealand stocks largely shook off news that Prime Minister Jacinda Ardern will step down next month, falling just 0.1%. The nation’s currency was down about 0.4% and near its intraday low.

Australian stocks erased losses and bond yields extended their drop after the nation’s employment unexpectedly fell in December and the jobless rate held unchanged, casting doubt over another interest-rate increase in February.

US Treasury yields had slumped 18 basis points on Wednesday, the most in two months, as investors scurried to haven assets. The risk-off moves were driven by gloomy data and break with a prior dynamic where poor economic news has boosted riskier assets on the belief central banks will slow rate hikes.

Data released on Wednesday showed US consumers losing steam and business investment falling, heightening concerns that the economy may be moving closer to recession. Producer prices slid by the most since the start of the pandemic and retail sales fell by the most in a year. This didn’t deter Federal Reserve officials reaffirming the need to continue tightening monetary policy. 

Market pricing for the terminal Fed funds rate fell by more than 50 basis points from a day earlier in a sign investors are anticipating a rapid slow down to Federal Reserve interest rate hikes. Comments from Fed officials Wednesday, however, repeated calls for more hikes even after further signs the economy was softening and inflation cooling. 

St Louis Fed president James Bullard said policy was not yet in restrictive territory and projected a forecast rate of up to 5.5% by the end of the year in the Fed’s dot plot projections. is “almost” in restrictive territory but not quite. Cleveland Fed President Loretta Mester said the Fed needs “keep going” and Philadelphia Fed chief Patrick Harker repeated his view of lifting interest rates in quarter-point increments “going forward”.

In corporate news, Microsoft said it plans to cut 10,000 jobs, taking steps to cope with an increasingly bleak outlook. Bank of America started telling executives to pause hiring except for the most vital positions. Crypto firm Genesis Global Capital is said to be laying the groundwork for a bankruptcy filing. BM/DM