Asian shares on track for monthly loss

Singapore — Asian shares fell broadly on Wednesday, while the Australian dollar slid after surprisingly soft domestic inflation data and short-dated treasury yields stayed elevated ahead of a rate decision from the Federal Reserve.

Chinese markets wobbled after an official factory survey showed China’s manufacturing activity in January contracted for a fourth straight month.

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.5% and was heading for a monthly loss of 5%, snapping a two-month winning streak.

That was in part due to a steep sell-off in Chinese markets amid angst over the lack of large stimulus moves by authorities to shore up the economy and waning investor confidence.

Concern over the country’s beleaguered property sector also continued to weigh, as investors wait to see how the liquidation of property giant China Evergrande Group will play out.

China’s blue-chip index, which earlier in January sank to its lowest since 2019, was 0.7% lower on the day and down about 6% for January, marking its sixth consecutive monthly decline.

Hong Kong’s Hang Seng index shed more than 1%, weighed down by property and tech names, and was on track for its worst January performance since 2016.

Beijing has stepped in to put a floor under its sliding stock market, including a deep cut to banks’ reserve requirements.

“There’s a patently clear sign in my mind [that] they don’t want the market to go down any more,” Mark Matthews, Bank Julius Baer’s head of research for Asia, said at an outlook briefing in Singapore on Tuesday.

“Up until last week, they somehow thought that they could get away with just little dribs and drabs, and somebody must have decided somewhere that actually, no, we have to do more.”

Japan’s Nikkei, which has meanwhile been one of Asia’s standouts, looked set to end the month with a more than 7% gain, its best January performance in over a decade.

The index was last down 0.5%, as expectations mount for an imminent Bank of Japan (BoJ) pivot on monetary policy.

A summary of opinions at the central bank’s January policy meeting, released on Wednesday, showed that policymakers discussed the likelihood of a near-term exit from negative interest rates and possible scenarios for phasing out the bank’s huge stimulus programme.

The yen extended its gains following the release of the minutes and was last marginally higher at ¥147.62 to the dollar.

Still, the currency was headed for a monthly loss of more than 4%, on the back of a resurgence in the dollar and as stark interest rate differentials remain between Japan and the US

The Aussie dollar was last 0.6% lower at $0.6564 after data on Wednesday showed Australian consumer price inflation slowed more than expected in the fourth quarter to a two-year low, ramping up bets on imminent rate cuts.

Fed watch

Other market moves were largely subdued as traders stayed on guard ahead of the Fed’s rate decision later in the day, with the expectation that the central bank will keep rates on hold.

The focus, however, will be on Fed chair Jerome Powell’s post-meeting press conference, as well as any hints from policymakers on how soon the Fed could begin easing rates.

“It is too early to claim victory on inflation…. Therefore, we expect some persisting hints of tough language at this week’s FOMC [Federal open market committee],” said Benoit Anne, MD in the investment solutions group at MFS Investment Management.

“But there is nothing to worry about. The macro backdrop is as good as we have seen in a very long time, characterised by diminished recession risks and favourable disinflation dynamics.”

Data on Tuesday showed US job openings unexpectedly increased in December and data for the prior month was revised higher, pointing to a still-resilient labour market that is likely to give the Fed room to keep rates higher for longer.

That propped up the two-year treasury yield, which typically reflects near-term interest rate expectations. It was last at 4.3345%, having risen more than eight basis points for the month.

The US dollar similarly held broadly steady, with the euro down 0.18% at $1.0823. Sterling fell 0.17% to $1.26795.

Among commodities, oil prices dipped after climbing in the previous session as tension lingers in the Middle East.

Brent futures slipped 38c to $82.49 a barrel. US crude lost 32c to $77.50 a barrel.

Gold last bought $2,033.94/oz, retreating from a two-week top hit in the previous session.