SINGAPORE, Oct 3 (Reuters) – Asian shares fell to their lowest level this year on Tuesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) is down 1.6% since Nov. 28, 2022. Japan’s Nikkei (.N225) fell 1.8%, while Hong Kong’s Hang Seng Index (.HSI) . Chinese markets were closed for a week due to the Golden Week holiday.
Futures indicated a lower open for European stocks, 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 be restrained “for some time” to bring inflation back to the central bank’s 2% target.
“If incoming data indicates that progress in inflation has stalled or is too slow to bring inflation back to 2% in time, I would be prepared to support raising the federal funds rate at a future meeting,” Fed Governor Michelle Bowman said in a prepared statement on Monday. Remarks at the Banking Conference.
However, hawkish rhetoric from central bank officials comes as talk of another potential rate hike this year.
According to CME Group’s FedWatch tool, Fed Fund futures traders peg a 26% chance of a rate hike in November and a 45% chance of a December hike.
“We’re continuing this rise for the long haul,” said Rob Cornell, head of Asia-Pacific research at ING. “Higher bond yields, stronger dollar dominate story at the moment.”
Australia’s S&P/ASX 200 index (.AXJO) was 1.3% lower, while the Australian dollar fell 0.77% to $0.631, after the Reserve Bank of Australia kept interest rates steady for a fourth month on Tuesday and showed no rush to hike again.
However, the central bank again issued a warning that further tightening may be needed to bring inflation under control in a “reasonable timeframe”.
In the foreign exchange market, focus is on the Japanese yen as the currency nears 150 to the dollar – a level traders have speculated could lead to intervention by the authorities.
The yen traded at 149.89 per dollar in Asian hours, touching a 12-month low of 149.935 during the session.
Last September, Japanese authorities staged their first intervention in 24 years when the yen weakened past 145 to the dollar, and speculation has grown that they will step back in with the yen under constant pressure from a yawning yield gap against the dollar.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that authorities were watching the currency market closely and were ready to respond, repeatedly warning against speculative moves that did not reflect economic fundamentals.
“(It) feels like there’s an acceptance that if people move too far there may be some real intervention,” ING’s Cornell said. “It (the dollar-yen pair) is still moving upwards. At a very, very glacial pace.”
The dollar index, which measures the U.S. currency against six major rivals, rose 0.168% to hit a fresh 10-month high.
The yield on the 10-year Treasury note rose 0.2 basis points to 4.685% in Monday’s session, after touching 4.703%. Ahead of key jobs data this week, yields rose after a deal to avoid a partial U.S. government shutdown reduced demand for debt.
US crude fell 0.84% to $88.07 a barrel, while Brent was down 1.05% to $89.76.
Meanwhile, spot gold was down 0.5% at $1,818.10 an ounce. US gold futures were down 0.56% at $1,819.80 an ounce.
Report by Ankur Banerjee; Editing by Jamie Freed
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