Investors will focus on the US interest rate outlook and what Jerome Powell might say. (File)
Sydney:
Asian stocks retreated on Tuesday as weak trade data weighed on Chinese stocks, while investors awaited testimony from Federal Reserve Chairman Jerome Powell for clues on the central bank’s next move on rates.
Data on Tuesday showed China’s exports and imports fell sharply in January-February, reflecting a slowdown in the global economy and weak domestic demand. That sent Hong Kong’s Hang Seng down 0.76% and China’s blue-chip CSI300 down 1.2%, erasing earlier gains.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3%, although the index rose 2.9% this month.
Outside of China, investors’ eyes will be on the US interest rate outlook and what Powell might say.
“US rates are still the number one driver in Asia in terms of absolute yield,” Dan Finman, co-head of APAC equity strategy at Credit Suisse, told Reuters.
“China’s two sessions are important, but tariffs will be more important than what’s happening on the ground in Asia,” he said, referring to China’s National People’s Congress in Beijing.
The yield on the benchmark 10-year Treasury note hit 3.9578% on Monday, compared with a close of 3.983% in the US.
Two-year yields rose to 4.88%, compared with a U.S. close of 4.894%, lifted by traders’ expectations of higher Fed funds rates.
Focusing on monetary policy, Australian shares rose 0.49%, recovering earlier losses after the central bank raised interest rates as expected, but investors took it as a sign that the policy tightening cycle was coming to an end. . This pushed the Australian dollar to a more than two-month low of $0.6690.
Japan’s Nikkei stock index rose 0.3%.
In early European trade, the region-wide Euro Stoxx 50 futures were up 0.12%, German DAX futures were up 0.11% and FTSE futures were up 0.23%.
US S&P 500 e-minis futures rose 0.19% to 4,060.
Fed Chairman Powell is due to give his semi-annual testimony before Congress on Tuesday and Wednesday, which will closely monitor the US central bank’s decisions on the size and duration of its tight monetary policy aimed at curbing inflation.
Futures traders are pricing in a 76% chance the Fed will raise rates by 25 basis points at its March 21-22 meeting and a 24% chance of a 50bp hike.
The February US employment report is expected on Friday and any softening in the robust labor market is seen as a sign that the Fed’s rate hikes are having the desired effect.
“Congress testimony over the next two days will be very important for markets. Investors will be reassessing what the Fed will do with interest rates in March and the second quarter,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management.
Bank of America Chief Executive Brian Moynihan told a business summit in Sydney on Tuesday that the bank predicted the US economy would enter a technical recession later this year before the central bank starts cutting rates in 2024.
“It’s a very minor recession in the scheme of things. “I don’t think you’re going to see a deep recession,” he said.
“We think it’s based on a slowdown on the corporate or commercial side, not a slowdown on the consumer side.”
In Asian trade, the dollar rose 0.05% against the yen to 135.99, weaker than last week’s 137.10 year high.
The euro was up 1.02% on the month and up 0.1% on the day at $1.0684, while the dollar index, which tracks the greenback against a basket of major currencies, fell to 104.23.
US West Texas Intermediate oil rose 0.27% to $80.68 per barrel. Brent oil was 86.43 dollars per barrel.
Gold was slightly higher. Spot gold was sold at $1,848.56 an ounce.
(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)
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