MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.8% in early Asia trade and was headed for a fifth consecutive day of losses
Asian shares tracked a negative lead from Wall Street on Wednesday, while the dollar and Treasury yields climbed as traders trimmed expectations for the pace and scale of rate cuts by the Federal Reserve this year.
The current shift in rate expectations came after an upside surprise in U.S. inflation on Tuesday which showed the CPI increasing 3.1% on an annual basis, above forecasts for a 2.9% rise.
Futures now point to around 87 bps of easing priced in for the Fed this year, as compared to 110 bps prior to the data release and 160 bps at the end of last year.
That kept pressure on global stocks, which had rallied strongly towards the end of last year on bets for rate cuts by major central banks globally in 2024.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.8% in early Asia trade and was headed for a fifth consecutive day of losses.
S&P 500 futures and Nasdaq futures were trading near flat. EUROSTOXX 50 futures shed 0.3%.
The stronger data pushes back on the hope of a rate cut from the Fed any time soon, said Daniela Hathorn, senior market analyst at Capital.com.
We’ll likely have to wait for the second half of the year for the Federal Reserve to start cutting, but the issue is not so much whether the bank will cut rates this year, as that is an almost certainty at this point, but how many cuts there will be, Hathorn added.
Even Japan’s standout Nikkei was not spared from the beating and dropped 0.7%, after advancing 2.9% in the earlier session and topping the 38,000 level.
The recent move higher in the Nikkei was helped in part by a declining yen, which had softening past the key 150 per dollar level for the first time this year on Tuesday.
The yen stood at 150.63 per dollar.
Elsewhere, stocks in Hong Kong were in the red on their first trading day after the Lunar New Year holidays. The Hang Seng Index dropped 0.8%.
Mainland China’s financial markets remain closed for the week.
