Tokyo, April 6 (BNA): Asian stock markets fell on Wednesday as investors faced the prospect of monetary policy tightening by the US Federal Reserve to fight inflation, while the focus was also on new Western sanctions against Russia.
US Treasury yields hit multi-year highs and stock markets turned red after Fed Governor Lyle Brainard said overnight that she expects a combination of higher interest rates and a rapid balance sheet run-off to move US monetary policy to a “more neutral position”. later this year. . Read more
In morning trade in Asia, Japan’s Nikkei fell by about 2.0%, while South Korean shares fell 0.9%, and Australian shares lost 0.75%, Reuters reports.
MSCI’s broadest index of Asia Pacific shares outside Japan fell 1.3%.
Hong Kong’s Hang Seng Index is down 1.3%, moving away from a one-month high on Monday. Shanghai lost 0.1% as markets in mainland China reopened after two days of public holidays.
A closely watched private sector survey showed on Wednesday that activity in China’s services sector contracted at the fastest pace in two years in March, as a domestic Omicron surge constrained mobility and weighed on customer demand.
On Tuesday, Chinese authorities extended the COVID-19 lockdown in Shanghai to cover all of the financial center’s 26 million residents, despite growing anger over the city’s quarantine rules. Read more
Investors’ focus on Wednesday will be on the release of the minutes of the Federal Reserve’s latest policy meeting, which they are expected to examine for evidence of a possible 50 basis point hike at the US central bank’s next meeting in May.
“It currently sees an 80% chance that the Fed will take that path,” said Kyle Rhoda, market analyst at IG in Melbourne. Rhoda added that investors did not put full prices for such a move, so more evidence of that could move the markets.
“There are expectations that the Fed may raise 50 basis points in June as well, and if that becomes more likely, a re-pricing of this risk could lead to another spike in volatility,” he said.
The European Central Bank will publish the minutes of its meeting on Thursday.
Investors have also been waiting to see how a new round of Western sanctions against Russia will end.
The yield on the benchmark 10-year Treasury bond continued to climb, reaching a two-year high of 2.6120% before declining slightly. The last price was at 2.6048%.
The jump in yields after Brainard’s comments also played a role in the currency market, providing support for the dollar.
The dollar index reached 99.638, the highest level since late May 2020.
The dollar also traded strongly against the yen at 123.98 yen due to the Bank of Japan’s condemnation and repeated actions last week to keep the yield on Japanese 10-year government bonds below 0.25%.
The euro fell 0.1 percent to $1.0889.
The rise in bond yields globally has put pressure on gold, which is not paying off.
Spot gold was down 0.1% at $1,921.76 an ounce.
Oil prices fell, pressured by a stronger dollar and mounting concerns that new coronavirus cases could slow demand, despite ongoing supply concerns.
US crude fell 0.4 percent to $101.54 a barrel. Brent crude fell 0.4 percent to $106.19 a barrel.