Asian stocks fall on fears of hawkish central bank increases

HONG KONG (Reuters) – Asian stocks fell to a 47-day low on Wednesday as rising interest rate expectations and geopolitical tensions weighed on risky assets.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.02%, hitting its lowest level since Jan. 6.

Japan’s Nikkei (.N225) fell 1.32%, its worst performance in nearly a month after Tuesday’s PMI report showed the factory sector contracting.

The Bank of Japan (BOJ) said on Wednesday it would conduct emergency bond purchases, in a move to contain rising yields. Japan’s 10-year government bonds touched 0.505% for the second consecutive session, breaching the Bank of Japan’s 0.5% ceiling and reaching higher. The highest level since January 18. read more

New Zealand’s central bank raised interest rates by 50 basis points to a 14-year high of 4.75%. The central bank said it expects to continue tightening further to ensure inflation returns to its target range over the medium term. Read more

Wall Street posted its worst performance of the year on Tuesday, with an unexpectedly strong S&P Global Composite PMI reading showing that the US economy has yet to cool off.

“It has to do with the market that central banks are going to have to raise interest rates a lot more to curb inflation,” said Kerry Craig, global market analyst at JPMorgan Asset Management.

“I think the biggest concern right now is around the earnings outlook and how much does it really drop from here … versus the uncertainty about the possibility of a recession in the US.”

Russian President Vladimir Putin has issued a warning to the West about Ukraine by suspending the last major nuclear arms control treaty with the United States. The US Secretary of State said Putin’s move was “deeply unfortunate and irresponsible”.

“It (the nuclear deal’s suspension) has led to the next phase of escalation concerns, evoking President Biden’s response in Poland saying Russia will never win the war and pledging more support to Ukraine,” Saxo Markets APAC strategy team said in a client note. “The focus is now on China, which needs to back up the peace treaty’s words with action after being accused of supplying weapons to Russia.”

China’s benchmark index (.CSI300) was down 0.68% and Hong Kong’s Hang Seng Index (.HSI) was down 0.09%.

Australia’s S&P/ASX 200 Index (.AXJO) fell 0.3% on Wednesday, falling for a second consecutive session and touching its lowest in more than a month on expectations of a rate hike.

E-mini futures for the S&P 500 rose 0.16%.

The 10-year US bond touched 3.966%, the highest level since November, before falling to 3.948% on Wednesday.

The dollar index was flat, but analysts expect higher interest rates to raise the dollar, and hurt emerging market stocks, which benefited from the dollar’s decline.

US crude fell 0.46% to $76.01 a barrel, and Brent crude was at $82.74, down 0.37%.

Spot gold rose 0.1% to $1,835.28 an ounce.

Reporting from Selina Lee. Edited by Bradley Perrett

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