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Asian stocks slip as investors eye central bank hikes

January 31, 2023By Reuters

Jan 31 (Reuters) – Asian shares traded cautiously and bonds nursed small losses on Tuesday as investors braced for an eventful week that includes central bank meetings, a slew of earnings reports and key US economic data.

Investors broadly expect the US Federal Reserve will raise interest rates by 25 basis points (bps) on Wednesday. Rate announcements are due on Thursday from both the Bank of England and the European Central Bank – and both are expected to hike rates by 50 bps.

Meanwhile, more than 100 S&P 500 companies including Apple (AAPL), Amazon.com (AMZN) and Google parent Alphabet (GOOGL) are expected to report results this week, which also will see the publication of closely watched US employment numbers.

“It’s a big week for both central banks and US equities, with … some of the household names due to make earnings announcements that will provide a micro overview of the macro economy,” ANZ analysts said in a note.

“We expect a 25 bps (US) rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle … Risk appetite could be vulnerable to a correction.”

Early in the Asian trading day, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1%. US stock futures, the S&P 500 e-minis ESc1, rose 0.1%.

Japan’s Nikkei stock index .N225 slid 0.1% while Australian shares were up 0.2%.

China’s blue-chip CSI300 index .CSI300 remained flat in early trade. Hong Kong’s Hang Seng index opened up 0.4%.

On Monday, US stocks lost ground with the major indexes sinking, weighed down by declines in technology and other giant corporations’ shares.

The Dow Jones Industrial Average fell 0.8% to 33,717.09, the S&P 500 lost 1.3% to 4,017.77 and the Nasdaq Composite dropped 2.0% to 11,393.81.

Despite Monday’s declines, the S&P 500 remained on track to post its biggest January gain since 2019.

At the end of the Fed’s two-day policy meeting on Wednesday investors will be glued to Chair Jerome Powell’s news conference for clues on whether the rate-hiking cycle may be coming to a close, and for signs of how long rates could stay elevated.

Markets will also grapple with a flood of US economic data, culminating in Friday’s payrolls report for January. Investors see signs of weakening in the labour market as a key factor in bringing down high inflation.

US Treasury yields remained firm ahead of the central bank meetings and economic data, with the yield on benchmark 10-year Treasury notes standing at 3.5384% compared with its US close of 3.551% on Monday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 4.2402% compared with a US close of 4.261%.

In currencies, the US dollar, which was poised for its fourth month of declines, was down at 102.19 against a basket of other major currencies.

The European single currency was up 0.1% on the day at USD 1.0852, having gained 1.4% in a month.

In the energy market, oil prices fell on Monday ahead of the expected hikes by central banks and signals of strong Russian exports.

US crude ticked up 0.2% to USD 78.02 a barrel while Brent crude settled at USD 84.9 per barrel early in the Asia session.

Gold was slightly higher. Spot gold was traded at USD 1922.91 per ounce.

(Editing by Kenneth Maxwell)


This article originally appeared on reuters.com

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