Melbourne Jan. 18 (BNA): Asian stock markets mostly rose on Tuesday even as global investor interest remained steady on the possibility of a US interest rate hike in the next few months, after two years of unprecedented policy easing caused by the pandemic.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4%, after the US market was closed overnight for the Martin Luther King Jr. holiday. The index is up 1.1% so far this month.
Australian shares are up 0.29%, while China’s CSI300 is up 0.33% in early trade.
Hong Kong’s Hang Seng Index also rose 0.61%.
Japan’s Nikkei is trading up 0.63% ahead of the Bank of Japan’s decision scheduled between 02:30 – 05:00 GMT.
The BoJ is not expected to change its stance on ultra-low interest rates but inflation expectations for 2022 are likely to increase.
Ahead of the meeting results, the dollar traded against the yen at 114.51. It is still some distance from this year’s low of 113.49 last week.
The US Federal Reserve is set to meet January 25-26, and while it is not expected to change interest rates after that, a growing number of investors believe that March will be the start of a tightening cycle.
Higher interest rates are generally seen as negative for riskier assets such as stocks.
John Milroy, an advisor at Sydney-based brokerage Ord Minute, said investors remained focused on the Federal Reserve and the pace at which they raised interest rates.
“We believe it will be faster than the markets currently expect. Boom conditions remain in the US with a tight labor market. Good for global growth but increases inflationary pressures.”
The prospect of higher US interest rates was also playing out in fixed income markets on Tuesday, after the US market closed on Monday.
In Asian money market trading on Tuesday, two-year bond yields rose above 1% for the first time since February 2020.
The two-year yield follows short-term price expectations and was last up 3.7 basis points at 1.0054%.
Five-year bond yields rose 3.6 basis points to 1.5960%, the highest level since January 2020. Yields on 10-year notes rose nearly 2 basis points to 1.8108% in early Tokyo trading.
The dollar index, which measures the greenback against a basket of the currencies of other major trading partners, rose to 95,254.
US crude rose 0.49% to $84.23 a barrel. Brent crude rose to $86.53 a barrel.
Gold was a little lower. Spot gold was trading at $1,818.2274 an ounce.
HF