Asian stocks fell, and the dollar’s rally stalled as Fed signals awaited

SINGAPORE (Reuters) – Asian stocks fell on Tuesday as the prospect of the US central bank remaining on its hawkish path weighed on sentiment, as investors looked to the minutes of the Federal Reserve’s latest meeting for more clues regarding monetary policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.7% to 529.97, hovering around a six-week low of 529.30 that touched last week.

The index is down nearly 3% this month, after jumping 8.6% in January, as a string of strong economic data in the United States fueled concerns that interest rates may need to rise further and stay higher for longer.

The market is now pricing in US interest rates to peak at 5.30% in July and remain above 5% by the end of the year, diverging from expectations for deeper rate cuts this year.

European stock futures indicated stocks are heading lower, with Eurostoxx 50 futures down 0.14%, German DAX futures down 0.07%, and FTSE futures down 0.13%.

“The backdrop of US inflation fears keeps the risk of a tighter-than-expected monetary policy, and yields remain a key focus as US markets return later today,” said Saxo Markets strategists.

US markets were closed on Monday due to the President’s Day holiday. E-mini futures for the S&P 500 fell 0.45%.

Japan’s Nikkei (.N225) is down 0.24%, while Australia’s S&P/ASX 200 (.AXJO) is down 0.21%.

Chinese stocks slipped, with the Shanghai Composite (.SSEC) up 0.06%, while Hong Kong’s Hang Seng (.HSI) down 1.7%, on geopolitical concerns ahead of the one-year anniversary of the Ukraine war and doubts about the Chinese economy. The impact of the recovery on stocks.

Anderson Alves, a market analyst at ActivTrades, said traders have been reporting on the outperformance of Chinese stocks this year due to the reopening efforts.

However, it is worth paying attention to the geopolitical front as the US has warned of consequences if China provides material support to Russia over the Ukraine war.

The yield on the 10-year Treasury rose 2.3 basis points to 3.852%, after touching a three-month high of 3.929% on Friday.

The yield on the 30-year Treasury rose 1.1 basis points to 3.899%, while the yield on the two-year US Treasury note, which usually moves in accordance with interest rate expectations, rose 3.5 basis points to 4.658%.

Investors are firmly focused on the release of the minutes of the Federal Reserve’s last meeting on Wednesday earlier this month when it raised interest rates by 25 basis points.

In the currency market, the dollar was shy of recent highs as a three-week rally faded, as traders looked to European and US manufacturing data later on Tuesday and the core PCE price index on Friday to help guide their next steps. / frx

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

The dollar index, which measures the greenback against six other rivals, was latest at 103.99, just below a six-week high of 104.67 touched on Friday.

The euro fell 0.11% to $1,067 and is set to snap four straight months of gains and end February lower.

The yen fell 0.11% to 134.38 per dollar, while the pound sterling was last traded at 1.2026 dollars, down 0.10%.

US crude fell 0.08% to $76.28 a barrel, and Brent crude reached $83.01, down 1.26% for the day.

Reporting by Ankur Banerjee. Editing by Shri Navaratnam and Himani Sarkar

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