Asian stocks slide to lowest this year on rate worries

SINGAPORE – Asian shares slid on Tuesday to their lowest this year as worries over higher U.S interest rates for longer period gripped markets, while the yen wobbled near a one-year low, keeping traders on alert for a possible intervention.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6 percent to the lowest since Nov. 28, 2022. Japan’s Nikkei fell 1.8 percent, while Hong Kong’s Hang Seng Index sank 3 percent. Chinese markets were closed for the week because of the Golden Week holiday.

Futures indicated European stocks were due to open lower, with the Eurostoxx 50 futures down 0.58 percent, German DAX futures 0.60% lower and FTSE futures down 0.31 percent.

U.S. Federal Reserve officials said that monetary policy will need to stay restrictive for “some time” to bring inflation back down to the Fed’s 2 percent target.

“I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2 percent in a timely way,” Fed Governor Michelle Bowman said Monday in prepared remarks to a banking conference.

Still, the hawkish rhetoric from the Fed officials comes as an ongoing debate over another possible rate hike this year rages on.

Fed funds futures traders are pricing in a 26-percent chance of a rate hike in November, and a 45- percent likelihood of an increase by December, according to the CME Group’s FedWatch Tool.

Australia’s S&P/ASX 200 index was 1.3 percent lower, while the Australian dollar eased 0.77 percent to $0.631 after the Reserve Bank of Australia held interest rates steady on Tuesday for a fourth month and showed no urgency to hike again.

The central bank, however, repeated a warning that further tightening might be needed to bring inflation to heel in a “reasonable timeframe”.

Yen vigil

In the foreign exchange market, the focus remains on the Japanese yen as the currency inches closer to the 150 per dollar mark – a level traders have speculated could lead to intervention from the authorities.

The yen was last at 149.83 per U.S. dollar in Asian hours, having scaled a fresh near 12-month low of 149.895 earlier in the session.

Last September, Japanese authorities conducted their first intervention in 24 years, when the yen weakened past 145 per dollar, and speculation has mounted that they will step in again with the yen under constant pressure due to a yawning yield gap against the dollar.

Japanese Finance Minister Shunichi Suzuki said on Tuesday authorities were watching the currency market closely and stood ready to respond, repeating a warning against speculative moves that did not reflect economic fundamentals.

The dollar index, which measures the U.S currency against six major rivals, rose 0.093 percent to scale a fresh 10-month peak.

The yield on 10-year Treasury notes was down 0.7 basis points to 4.676 percent in Asian hours after touching 4.703 percent, the highest since October 2007, in the Monday session. The yields got a boost after an agreement to avert a partial U.S. government shutdown reduced demand for the debt before key jobs data this week.

U.S. crude fell 1.04 percent to $87.90 per barrel and Brent was at $89.73, down 1.08 percent on the day.

Meanwhile, spot gold dropped 0.4 percent to $1,820.50 an ounce. U.S. gold futures fell 0.27 percent to $1,825.00 an ounce.