Asian stocks fall, dollar rally put on hold as Fed watched

SINGAPORE, Feb. 21 (Reuters) – Asian stocks fell on Tuesday as the prospect of the US central bank having to stay on its aggressive path weighed on sentiment, with investors looking to the minutes of the Federal Reserve’s latest meeting for further indications of monetary policy.

MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 0.7% to 529.97, hovering around last week’s six-week low of 529.30.

The index is down nearly 3% this month, following an 8.6% rise in January, when a raft of robust US economic data fueled fears that rates should rise further and stay high for longer.

The market is now pricing US interest rates at a peak of 5.30% in July and to remain above 5% by the end of the year, skipping expectations of deeper rate cuts this year.

European stock futures indicated shares would fall, with Eurostoxx 50 futures down 0.14%, German DAX futures up 0.07% and FTSE futures up 0.13%.

“The backdrop of inflation concerns in the US continues to perpetuate the risk of a tighter-than-expected monetary policy, and yields remain a key focus as US markets return later today,” said Saxo Markets strategists.

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US markets were closed Monday for the President’s Day holiday. E-mini futures for the S&P 500 fell 0.45%.

The Japanese Nikkei (.N225) was down 0.24%, while the Australian S&P/ASX 200 index (.AXJO) fell 0.21%.

Chinese equities were subdued, with the Shanghai Composite Index (.SSEC) up 0.06%, while the Hong Kong Hang Seng Index (.HSI) fell 1.7%, due to geopolitical concerns ahead of the the one-year anniversary of the war in Ukraine and doubts about China’s economic situation. recovery weighed on equities.

ActivTrades market analyst Anderson Alves said traders have been talking about Chinese stocks outperforming this year due to the reopening efforts.

“However, it is worth keeping an eye on the geopolitical front as the US warned of the consequences if China provides material support to Russia in connection with the war in Ukraine.”

The yield on 10-year Treasury bills rose 2.3 basis points to 3.852%, after hitting a three-month high of 3.929% on Friday.

The yield on the 30-year Treasury bond rose 1.1 basis points to 3.899%, while that of two-year US Treasury bills, which tend to move in line with interest rate expectations, rose 3.5 basis points to 4.658%.

Investors are focused on Wednesday’s release of the minutes of the Fed’s last meeting earlier this month, when interest rates were raised by 25 basis points.

In the foreign exchange market, the dollar was just past its recent highs as a three-week rally petered out, with traders looking to European and US manufacturing data later on Tuesday and Friday, the PCE’s core price index to help guide their next moves. /FRX

DBS currency strategist Philip Wee said the market is bracing for another surprise in PCE data following strong US nonfarm payrolls and CPI readings this month.

The dollar index, which measures the US currency against six other rivals, was most recently at 103.99, just below its six-week high of 104.67 reached on Friday.

The euro fell 0.11% to $1.067 and is expected to rise for four months in a row before finishing February lower.

The yen weakened 0.11% to 134.38 per dollar, while the pound last traded at $1.2026, down 0.10%.

US crude fell 0.08% to $76.28 a barrel and Brent was at $83.01, down 1.26% on the day.

Reporting by Ankur Banerjee; Edited by Shri Navaratnam and Himani Sarkar

Our Standards: The Thomson Reuters Principles of Trust.





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