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Asia equities fell yesterday in seesawing trade after heavy selling on Wall Street late last week as investors ratcheted up forecasts for US interest rates following hot inflation data.
Declines for shares in Australia, South Korea and China weighed on a gauge of the region’s stocks. Hong Kong’s Hang Seng Index approached levels that would wipe out its 2023. Japanese stocks fluctuated.
US futures ticked higher, taking the edge off Friday’s slump of more than 1 percent for the S&P 500 and Nasdaq 100, which each suffered their worst week since December.
Investor jitters over riskier assets follows an unexpected acceleration in January of the personal consumption expenditures price index, the Federal Reserve’s favoured inflation gauge. The PCE data release Friday prompted a swift repricing of interest rate forecasts, with traders now pricing US rates to peak at 5,4 percent this year, compared to expectations held just a month ago of rates to peak at less than 5 percent.
“It seems premature to call a turnaround in risk this week,” Chris Weston, head of research for Pepperstone Group, in a Monday note. “The clouds of uncertainty remain with us – the market’s consensus view that inflation would head lower through the year has clearly been challenged.”
The yen strengthened against the dollar after a sharp fall on Friday. Bank of Japan Governor nominee Kazuo Ueda is speaking again in the Japanese parliament Monday. Inflation data released last week showed prices in the nation were rising at the fastest pace in four decades, placing pressure on the central bank to reassess its loose policy settings.
Yield on the 10-year Treasury was broadly unchanged in Asia on Monday after a jump of seven basis points Friday. Elevated yields continued to support the dollar, with a gauge of greenback flat after rising 0,7 percent Friday.
The Australian 10-year yield rose seven points while the New Zealand 10-year yield climbed three basis points and was near the highest level since November.
Data due later in the day will provided extra context for the global economic outlook. Eurozone economic and consumer confidence is due, along with durable goods data from the US.
Elsewhere in markets, oil steadied as concerns that the Fed will keep on raising interest rates to combat inflation balanced out a supply disruption in Europe and optimism over a demand recovery in China. Gold was also steady.
Iron ore sank following an order by Chinese authorities to cut production in its major steelmaking hub in a bid to curb pollution. – Bloomberg
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