TOKYO / NEW YORK (Reuters) – Asian stocks fell Wednesday, following Wall Street as investors waited to see if the US Federal Reserve will signal a faster path to policy normalization than previously expected.
The US central bank ends a two-day meeting later in the day.
An index of regional stocks excluding Japan retreated 0.5%, led by declines in South Korea’s Kospi.
The Shanghai Composite Index lost 0.3% and Hong Kong’s Hang Seng fell 0.3%.
Japan’s Nikkei 225 was flat to slightly lower, while the broader Topix index broke the trend to move up 0.1%.
European equities would open weaker, with pan-region Euro Stoxx 50 futures down 0.1%. FTSE futures also fell slightly in early deals.
Global markets have been hit by a defeat in treasury bills in recent weeks that pushed benchmark returns to a more than a year high as bond investors bet on accelerated COVID-19 vaccinations and massive fiscal stimulus measures faster than expected to boost growth and inflation in ‘ the world’s largest economy.
The volatility has fueled speculation that the Fed might be forced to make a technical adjustment of the levers controlling its policy rate, but few expect the central bank to take action at this week’s meeting, even as it releases brighter growth forecasts.
“We expect (Chairman Jerome) Powell to note that the FOMC has the tools to intervene if the bond market becomes disordered or impedes economic recovery,” wrote analysts from the Commonwealth Bank of Australia.
“But we expect Powell to back down against talk of policy tightening due to the large amount of slack in the labor market … US bond yields and the USD could rise if the FOMC’s post-meeting statement and Powell’s statement are not considered moderate enough. . “
The benchmark 10-year Treasury yield continued to consolidate around 1.6%, reaching 1.6268% in Asia on Wednesday. They hit 1.6420% on Friday for the first time since February last year.
An index tracking the dollar against six major peers was held at around 91.90 after pulling back from the three-month high of 92,506 reached last week.
Forex market caution could last all week, with the Bank of England announcing its policy decision on Thursday and the Bank of Japan finalizing a policy review on Friday that could phase out a numerical target for buying assets.
On Tuesday, the Dow Jones Industrial Average fell 0.39%, while the S&P 500 lost 0.16%. The Nasdaq Composite was up 0.09%.
E-mini futures for the S&P 500 were down 0.04% on Wednesday.
The gold price rose slightly to float at its highest level in more than two weeks on the outlook for higher inflation.
Spot gold was up about 0.3% to $ 1,736.55 an ounce.
Brent crude oil futures rose 33 cents to $ 68.72 a barrel and US crude oil futures added 40 cents to $ 65.20 a barrel.
Reporting by Kevin Buckland; Edited by Kim Coghill and Sam Holmes