SINGAPORE, Feb 21 (Portal) – Asian stocks slid on Tuesday as the prospect of the US Federal Reserve having to stay on its hawkish stance weighed on sentiment, with investors following minutes of the Federal Reserve’s latest meeting on the lookout for monetary policy cues.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) slipped 0.7% to 529.97, hovering around a six-week low of 529.30 set last week.
The index is down almost 3% this month after rising 8.6% in January as a string of robust US economic data fueled fears that interest rates may need to rise further and stay high for longer.
The market now expects US interest rates to peak at 5.30% in July and remain above 5% through the end of the year, moving away from expectations of deeper rate cuts this year.
European stock futures pointed to a decline in price, with Eurostoxx 50 futures down 0.14%, German DAX futures down 0.07% and FTSE futures down 0.13%.
“The backdrop of inflation concerns in the US still poses risks of 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 on Monday for the President’s Day holiday. E-mini futures for the S&P 500 fell 0.45%.
Japan’s Nikkei (.N225) was down 0.24%, while Australia’s S&P/ASX 200 index (.AXJO) fell 0.21%.
Chinese stocks were subdued, with the Shanghai Composite Index (.SSEC) gaining 0.06%, while Hong Kong’s Hang Seng Index (.HSI) slipped 1.7% amid geopolitical concerns ahead of the one-year anniversary of the Ukraine war and doubts over the China’s Economy Emerging The recovery weighed on equities.
ActivTrades market analyst Anderson Alves said traders had spoken of Chinese stocks outperforming this year on their reopening efforts.
“It’s worth keeping an eye on the geopolitical front, however, as the US has warned of the consequences if China provides material support to Russia in the Ukraine war.”
The 10-year government bond yield rose 2.3 basis points to 3.852% after hitting a three-month high of 3.929% on Friday.
The 30-year Treasury yield rose 1.1 basis points to 3.899%, while the US 2-year Treasury yield, which normally moves in step with interest rate expectations, rose 3.5 basis points to 4.658%.
Investors are firmly focused on the Fed’s release of minutes from its last meeting earlier this month on Wednesday, when it hiked interest rates by 25 basis points.
In the forex market, the dollar was just off recent highs as a three-week rally faded, with traders later on Tuesday and Friday looking to European and US manufacturing data from the Core PCE Price Index to guide their next moves. /FRX
DBS currency strategist Philip Wee said the market is bracing for another surprise in the PCE data after this month’s strong US jobs and CPI reads.
The dollar index, which measures the US currency against six other rivals, was last seen at 103.99, just below a six-week high of 104.67 hit on Friday.
The euro fell 0.11% to $1.067 and is expected to post four straight months of gains and trade lower in late February.
The yen weakened 0.11% to 134.38 per dollar, while sterling 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
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