Asian stocks fall to their lowest levels this year on concerns about interest rates

SINGAPORE (Reuters) – Asian stocks fell on Tuesday to their lowest levels this year as concerns about higher U.S. interest rates for longer weighed on markets, while the yen fluctuated near a one-year low, keeping traders on alert for possible intervention. .

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.6% to the lowest level since Nov. 28, 2022. Japan’s Nikkei (.N225) fell 1.8%, while Hong Kong’s Hang Seng Index (.HSI) fell. By 3%. . Chinese markets were closed this week due to the Golden Week holiday.

Futures indicated that European stocks are set to open lower, with Eurostoxx 50 futures down 0.58%, German DAX futures down 0.60%, and FTSE futures down 0.31%.

US Federal Reserve officials said monetary policy would need to remain tight “for some time” to bring inflation down to the central bank’s 2% target.

“I remain willing to support a hike in the federal funds rate at a future meeting if incoming data suggest that progress in inflation has stalled or is too slow for inflation to reach 2% in the future,” Fed Governor Michelle Bowman said Monday in a prepared statement. “The right time.” Statements to the banking conference.

However, the tough rhetoric from Fed officials comes as debate intensifies over the possibility of raising interest rates this year.

Fed funds futures traders expect a 26% chance of a rate hike in November, and a 45% chance of an increase by December, according to CME Group’s FedWatch tool.

“We continue this rally for a while longer,” said Rob Carnell, head of Asia-Pacific research at ING. “Rising bond yields and a strong dollar right now is the dominant story.”

Australia’s S&P/ASX 200 Index (.AXJO) fell 1.3%, while the Australian dollar fell 0.77% to US$0.631 after the Reserve Bank of Australia kept interest rates steady on Tuesday for a fourth month and showed no need to raise them again.

However, the central bank reiterated its warning that further tightening may be needed to bring down inflation in a “reasonable time frame.”

yen vigil

In the foreign exchange market, the focus remains on the Japanese yen as the currency approaches the $150 per dollar level – a level that traders expected could trigger intervention by the authorities.

The yen price reached 149.89 per dollar in the latest trading during the Asian hours, after it fell to its lowest level in 12 months at 149.935 during the session.

Last September, the Japanese authorities made their first intervention in 24 years, when the yen exchange rate fell to more than 145 yen against the dollar, and speculation increased that they would intervene again with the yen under constant pressure due to the ever-widening yield gap against the dollar. .

Japanese Finance Minister Shunichi Suzuki said Tuesday that authorities are closely monitoring the currency market and are preparing to respond, reiterating a warning against speculative moves that do not reflect economic fundamentals.

“People seem to have accepted that there might be some real intervention if they move much higher,” ING’s Carnell said. “USD/JPY is still drifting higher. But at a very slow pace.”

The dollar index, which measures the greenback against six major rivals, rose 0.168% to hit a new 10-month peak.

The yield on 10-year Treasury bonds rose by 0.2 basis points to 4.685% after reaching 4.703%, the highest level since October 2007, in Monday’s session. Yields received a boost after an agreement to avoid a partial US government shutdown, which led to a decline in debt demand ahead of key jobs data this week.

US crude fell 0.84% ​​to $88.07 a barrel, and Brent crude reached $89.76, down 1.05% on the day.

Meanwhile, spot gold fell 0.5% to $1,818.10 an ounce. US gold futures fell 0.56 percent to $1,819.80 an ounce.

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