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SYDNEY, Sept 26 (Reuters) – Asian stocks were expected to start the final week of the quarter down on Monday as the dollar rose as the prospect of high interest rates and weak growth rattles markets.
S&P 500 futures were flat after an initial decline. Futures pointed to falls in Tokyo, Sydney and Hong Kong. The Dollar hit new highs against the British Pound, Euro and Aussie in weak morning trading.
Last week, stocks and bonds tumbled after the United States and half a dozen other countries raised rates and forecast trouble. Japan intervened in currency trading to support the yen. Investors have lost faith in Britain’s economic management.
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The Nasdaq (.IXIC) lost more than 5% for the second week in a row. The S&P 500 (.SPX) fell 4.8%.
“A weekend of reflection has not caused anyone to change their minds,” National Australia Bank head of currency strategy Ray Attrill said in Sydney. “It’s about shoot first and ask questions later, when it comes to UK assets.”
Gilts suffered their biggest selloff in three decades on Friday and on Monday the pound hit a 37-year low of $1.0765 as investors believe planned tax cuts will stretch public finances to the limit.
The British pound is down 11% this quarter.
Five-year gilt yields rose 94 basis points last week, by far the biggest weekly jump recorded in Refinitiv data dating back to the mid-1980s. Treasuries also fell last week, with two-year yields up 35 basis points to 4.2140% and benchmark 10-year yields up 25 basis points to 3.6970%.
The euro hit a two-decade low at $0.9660 as war risks mount in Ukraine, before stabilizing at $0.9696.
In Italy, a right-wing alliance led by Giorgia Meloni’s Brothers of Italy party was on track to secure a clear majority in the next parliament, as expected. Some rejoiced at a mediocre performance by the eurosceptics of La Ligue.
“I expect a relatively small impact given that the League, the less pro-European party, seems to have come out weak,” said Giuseppe Sersale, fund manager and strategist at Anthilia in Milan.
The other currencies were lactation losses. The Aussie touched $0.6510, its lowest since mid-2020. The yen hovered at 143.47 on concerns over possible further intervention preventing it from losing. Japan intervened in the foreign exchange market on Thursday to buy yen for the first time since 1998.
Oil and gold stabilized after declines against the rising dollar last week. Gold hit a more than two-year low on Friday and bought $1,643 an ounce on Monday. Brent crude futures rose 71 cents to $86.86 a barrel.
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Additional reporting by Danilo Masoni in Milan; Editing by Kim Coghill and Sam Holmes
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