(Bloomberg) -- Asian stocks wavered Thursday, Treasuries held a rally and oil sank as investors parsed the economic outlook after Federal Reserve Chair Jerome Powell acknowledged the risk of a recession.
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An Asian share index was steady, with a report that Hong Kong's incoming leader John Lee is working on a strategy to reopen the city's borders helping sentiment. US and European futures were in the red.
Treasuries were little changed after jumping in the Wall Street session, leaving policy-sensitive two-year yields at about 3.06%. Bonds jumped in Australia and New Zealand. The dollar and the yen inched higher.
In commodities, oil dropped 3% to under $103 a barrel, sapped by fears over the demand outlook. A raw-materials index is at the lowest since March.
Powell in testimony to the Senate Wednesday said the US has to get high inflation back down to the 2% target. He accepted that steep rate increases could cause an economic contraction and called a soft landing "very challenging."
"We are still in an era where uncertainty is elevated and is expected to remain so for quite a while," JoAnne Feeney, Advisors Capital Management portfolio manager, said on Bloomberg Television. "It's risky right now in terms of the forward outlook for the global economy. Recession risk has clearly risen."
The odds of the Fed's rate-hiking cycle extending beyond the November policy meeting have diminished sharply as traders continue to price the prospects of a hard-landing and swifter policy reversal next year.
Powell "has acknowledged that rates will continue to increase, but the FOMC committee is cognizant of watching incoming data, suggesting the Fed will not be exclusively on autopilot with tightening," said Joe Gilbert, portfolio manager for Integrity Asset Management.
Elsewhere, Bitcoin climbed back above $20,000, while gold dipped.
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What to watch this week:
Powell US House testimony, Thursday
US initial jobless claims, Thursday
PMIs for eurozone, France, Germany, UK, Australia, Thursday
ECB economic bulletin, Thursday
US University of Michigan consumer sentiment, Friday
RBA's Lowe speaks on panel, Friday
Some of the main moves in markets:
S&P 500 futures fell 0.4% as of 10:56 a.m. in Tokyo. The S&P 500 fell 0.1%
Nasdaq 100 futures fell 0.4%, The Nasdaq 100 fell 0.2%
Japan's Topix index was steady
Australia's S&P/ASX 200 Index added 0.3%
South Korea's Kospi index fell 0.1%
Hong Kong's Hang Seng Index rose 0.5%
China's Shanghai Composite Index rose 0.2%
The Bloomberg Dollar Spot Index rose 0.1%
The euro was at $1.0560
The Japanese yen rose 0.3% to 135.82 per dollar
The offshore yuan was at 6.7124 per dollar
The yield on 10-year Treasuries was at 3.16%
Australia's 10-year yield fell 13 basis points to 3.86%
West Texas Intermediate crude fell 2.9% to $103.07 a barrel
Gold was at $1,833.11 an ounce
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