Ahead of US inflation data, Asian stock market choppy with Japanese Nikkei down 1.5%; Rising US dollar


Asian stocks fell while the U.S. dollar remained strong on Tuesday as Treasury yields hit a three-year high ahead of U.S. inflation data that could herald even more aggressive interest rate hikes of from the Federal Reserve.

MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.3%, after US stocks ended the previous session with slight losses. Australian stocks were down 0.65%, while Japan’s Nikkei stock index slid 1.5%.

Rising US bond yields supported the dollar, with the index’s measure of the US currency against six peers rising above 100 to test last week’s near two-year high.

The Japanese currency took the brunt of the losses against the greenback, which hit 125.77 yen overnight, its highest since June 2015.

The yen has come under pressure in recent months as the Bank of Japan pledged ultra-accommodative policy even as many other major central banks, led by the Fed, embarked on tightening conditions. monetary.

The euro has been rocked by politics, unable to hold on to gains from its mini relief rally on Monday after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in the first round of the presidential election.

It was last stable at $1.087. U.S. stocks fell on Monday as investors grew concerned that a three-year high in the benchmark 10-year U.S. Treasury yield would start to drag the economy down, and looked forward to the next earnings season. for signs of the impact of inflation on corporate profits,” Ord Minnett research analysts wrote to clients on Tuesday.

Chinese markets gained ground as signs emerged that some of the tough restrictions were beginning to ease in the country’s financial capital.

Global markets have been hit hard in recent months on concerns that the war in Ukraine, Fed tightening and China’s tough new COVID-19 restrictions could dampen global growth.

Hong Kong’s Hang Seng index gained 0.6% in early trading on Tuesday, while China’s blue-chip CSI300 index rose 0.4%.

Tech stocks weighed on Wall Street in Monday’s session as the Dow Jones Industrial Average (.DJI) fell 1.19%, the S&P 500 (.SPX) lost 1.69% and the Nasdaq Composite (.IXIC) fell 2.18%. All 11 sectors of the S&P 500 fell.

Economists polled by Reuters expect the U.S. consumer price index (CPI) to post an 8.4% year-on-year increase in March on Tuesday.

NatWest Markets economists forecast a 1.1% month-over-month jump in headline inflation, which would be the largest monthly gain since June 2008.

“We are quite hawkish in terms of U.S. rate hikes and believe it is not just the magnitude of the tightening but the pace that will impact investors,” Elizabeth Tian, ​​​Head of Equity Derivatives at Citigroup in Sydney.

“Equity markets have been very resilient and quite relaxed relative to fixed income markets, but we expect that at the May Fed meeting there will be some sort of announcement in terms of reduction in quantitative easing and that is when we might see volatility emerge in equities.

“The question is going to be how markets react to the speed of rate hikes that we might see.”

Early in the Asian session, the yield on the benchmark 10-year Treasuries rose to 2.8107% from its US close of 2.782% on Monday.

The two-year yield, which rises on traders’ expectations of a hike in the fed funds rate, touched 2.5242% from a US close of 2.508%.

U.S. crude rose 0.85% to $95.09 a barrel. Brent crude hit $99.18 a barrel.

Gold was slightly lower. Spot gold was trading at $1951.45 an ounce.


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