A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying Japan’s Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS /Kim Kyung-Hoon

SINGAPORE, April 8 (Reuters) – Stocks were heading for a weekly loss on Friday as the prospect of aggressive global rate hikes finally began to rattle investors, as bonds tumbled and the dollar looked poised for its best week since a month.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) was flat in morning trade and down about 1.5% for the week so far. The Japanese Nikkei (.N225) fell 0.2% on Friday to head for a weekly loss of almost 3%.

A late rally had lifted the Wall Street indexes slightly, but they are also all down for the week, led by a 2.5% loss for the rate-sensitive Nasdaq (.IXIC). US futures were flat.

Federal Reserve policymakers are ready to start cutting central bank holdings from May and are ready to raise rates by 50 basis points both to curb inflation, meeting minutes and the officials’ remarks were published this week.

The war in Ukraine and the shock wave it caused to commodity prices, as well as the ongoing damage to supply chains caused by the pandemic, put even greater pressure on consumer prices and reinforce the feeling of a major change in trends.

“Combine that…and the equity risk premium in any market must go up,” said Lirong Xu, chief investment officer at Franklin Templeton Sealand Fund Management in Shanghai. “And interest rates won’t drop any further.”

“The past two decades have brought low inflation and a relatively peaceful world. Going forward, geopolitical conflicts may become increasingly volatile and have a greater impact on the global economy as a whole.”

The risk of a populist upheaval in France’s presidential elections has also sown jitters in markets – dragging down French debt and the euro – ahead of Sunday’s first round of voting.

A victory for far-right leader Marine Le Pen over incumbent President Emmanuel Macron, while still unlikely, is now within the margins of error, according to opinion polls and the euro has fallen to a low. a month at $1.0858 in morning trading.

Elsewhere, long-term Treasuries bore the brunt of this week’s sell-off in hemorrhaging bond markets as traders saw it hit hardest by the Fed’s cut in bond holdings.

The benchmark 10-year Treasury yield rose 25 basis points (bps) to 2.6409% this week, and was flat in Asian trading on Friday. The 30-year rate is up 22 bps.

The U.S. dollar was the main beneficiary and the dollar index, which measures the greenback against a basket of six major currencies, hit a near two-year high of 99.904 on Friday.

The strengthening dollar and lower oil prices with the release of reserves from reserves also pushed commodity-linked currencies to their recent highs and increased pressure on the struggling yen. Japan’s currency is near its lowest levels in years and was under pressure at 124.23 to the dollar.

Brent crude futures were flat at $100.56 a barrel and U.S. crude futures held steady at $96.17.

There were also bright spots, with Australia’s heavy banking and miner stock market (.AXJO) suspended for a flat week and European and FTSE futures posting gains of around 0.8% on Friday.

“A higher rate environment occurring throughout the bull cycle will continue to benefit value stocks relative to growth stocks and offers a more constructive outlook for sectors like financials,” said strategist Clara Cheong. based in Singapore at JP Morgan Asset Management.

Reporting by Tom Westbrook; Editing by Sam Holmes

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