Asian shares hover around six-week lows

Singapore — Asian stocks edged lower on Tuesday as the prospect of the US central bank having to stay on its hawkish path weighed on sentiment, with investors looking to the minutes of the latest Federal Reserve meeting for further monetary policy clues.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.34% to 531.85, hovering around six-week lows of 529.30 it touched last week.

The index is down nearly 3% this month after jumping 8.6% in January as a slew of robust US economic data reinforced fears that interest rates may need to rise further and stay higher for longer. The market is pricing US interest rates to peak at 5.30% in July and remain above 5% by the end of the year, moving away from expectations of deeper rate cuts this year.

Japan’s Nikkei was 0.01% higher, while Australia’s S&P/ASX 200 index fell 0.52%. China’s shares were set to start flat, while Hong Kong’s Hang Seng index opened 0.1% lower.

“The backdrop of inflation concerns in the US is still keeping risks of a tighter than expected monetary policy, and yields remain a key focus as US markets return later today,” strategists at Saxo Markets said.

US markets were closed on Monday due to the President’s Day holiday.

The yield on 10-year Treasury notes was up 3.5 basis points to 3.863%, after touching a three-month high of 3.929% on Friday.

The yield on the 30-year treasury bond was up one basis point to 3.899%, while that of the two-year US treasury paper, which typically moves in step with interest rate expectations, was up 5.4 basis points at 4.677%. Investor focus is on the release on Wednesday of the minutes of the Fed’s latest meeting when it raised interest rates by 25 basis points.

In the currency market, the dollar hovered just shy of recent peaks as a three-week rally faded, with traders looking to European and US manufacturing data later Tuesday and Friday’s core personal consumption expenditure (PCE) price index to help guide their next steps.

DBS currency strategist Philip Wee said the market is bracing for another surprise in the PCE data after strong US nonfarm payrolls and CPI readings this month.

The dollar index, which measures the US currency against six other rivals, was last at 104.01, just below a six-week high of 104.67 it touched on Friday. The euro fell 0.12% to $1.0669, and is set to snap four straight months of gains and end February lower.

The yen weakened 0.12% to 134.40 per dollar, while sterling was last at $1.2022, down 0.13%.

US crude was up 1.02% at $77.12 a barrel and Brent was at $83.80, down 0.32% on the day.

Reuters