GLOBAL MARKETS-Recessions risks knock stocks, speculators drawn back to yen

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Weak US data is hurting stock market sentiment

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Nikkei down, yen up as BOJ backs off

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Aussie slips in miss job; Kiwis sink as Ardern leaves

By Tom Westbrook

SINGAPORE, Jan 19 (Reuters) – Asian stock markets struggled on Thursday, after weak U.S. consumer data raised fears of a recession and pushed investors into safe-haven assets such as bonds, while the yen rose in Japan on market uncertainty about the Bank of Japan’s commitment.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8% and the 10-year US Treasury yield, which falls as prices rise, hit its lowest since in September at 3.66%. US crude oil prices fell 1%.

Japan’s Nikkei was also down 1% and the yen was up about 0.4% at 128.45 per dollar, a flat move that followed the Bank of Japan’s (BOJ) assessment of climate change and allowed monetary policy unchanged the day before.

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The BOJ has pursued ultra-easy policy for decades in an attempt to boost inflation and growth, but markets doubt it can sustain it, and traders have been selling off Japanese government bonds. and bought yen to bet on the change.

The Nikkei’s decline and the yen’s rise suggest that such speculation is here to stay, at least for now.

“There is strong speculation in the market that right now the (BOJ) meeting in January happened without any changes … but we will see something in March,” said Shafali Sachdev, head of of FX, fixed income and commodities in Asia at BNP Paribas Wealth Management in Singapore.

April could be another, he added, because then the BOJ will have a new governor. “My guess is that there may be more spies trying to establish a position in these meetings.”

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The ten-year Japanese government bond, the focus of the market’s challenge to the BOJ because of the zero target and the 0.5 percent limit on the upward movement, issued 0.415%.

RISING IS DANGEROUS

Overnight, the S&P 500 lost 1.6% after data showed US manufacturing output fell last month and retail sales fell by the most in a year.

S&P 500 futures fell 0.2% in Asia and are about to drop below their 50-day moving average.

“The decline in retail spending and industrial production adds to the theme of the economy slowing down and heading for a recession in 2023, and pushing the soft narrative that has dominated the market since January,” said National Australia Bank’s chief market economist, Tapas Strickland.

Microsoft’s announcement of 10,000 layoffs and hawkish comments from Cleveland Fed President Loretta Mester and the president of St. Louis Fed James Bullard added to the pressure, and both Fed officials expected US interest rates to rise above 5% this year.

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The dollar retook losses in London trading in the New York session and gained in Asia. The Australian dollar was last down 0.5% at $0.6907, losing ground after data showed an unexpected fall in Australian jobs last month.

The euro was under mild pressure at $1.1078 and the New Zealand dollar was slightly shaken by news of Prime Minister Jacinda Ardern’s resignation.

Minutes from last month’s European Central Bank meeting were due on Thursday, as ECB President Christine Lagarde appeared at the World Economic Forum in Davos.

(Reporting by Tom Westbrook; Editing by Bradley Perrett)

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