Asian stocks fell and the dollar climbed to more than five-month highs on Tuesday as stronger-than-expected U.S. retail sales for March further reinforced expectations that the Federal Reserve is unlikely to be in a rush to cut interest rates this year.
Rising geopolitical tensions kept risk sentiment in check,
lifting prices of gold and oil, while investor focus in Asia turns to China
with GDP data due at 0200 GMT.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 1.4% to nearly seven-week lows of 521.92, with Japan's Nikkei down 1.6%.
U.S. stocks closed sharply lower on Monday as a jump in
Treasury yields weighed on sentiment amid concerns about rising tensions
between Iran and Israel.
Israelis awaited word on how Prime Minister Benjamin
Netanyahu would respond to Iran's first-ever direct attack on their country.
Netanyahu on Monday summoned his war cabinet for the second time in less than
24 hours to weigh a response to Iran's weekend missile and drone attack, a
government source said.
"The markets have come alive with the sound of
derisking, deleveraging, hedging and broad managing of risk exposures,"
said Chris Weston, head of research at Pepperstone.
"There is certainly not much in the news flow to
inspire risk-taking and there is a growing list of factors to refrain from
buying and to manage exposures."
U.S. retail sales rose 0.7% last month, the Commerce
Department's Census Bureau said on Monday, while economists polled by Reuters
had forecast retail sales, which are mostly goods and are not adjusted for
inflation, would rise 0.3%.
The stronger-than-expected data comes after a report last
week underscored inflation remains stickier than markets had expected, leading
to a drastic scaling back of rate cuts this year.
Traders now anticipate 45 basis points of cuts this year,
down from more than 160 bps in expected easing at the start of the year.
Markets are now pricing in September, instead of June, to be the starting point
for rate cuts, according to CME FedWatch Tool.
The yield on 10-year Treasury notes was at 4.608% in Asian
hours having surged to a five-month high of 4.663% on Monday.
The elevated yields boosted the dollar and kept the yen near
34-year lows it has been rooted at in the past few days.
The dollar index, which measures the U.S. currency versus
six rivals, was up 0.028% at 106.23, having risen 0.189% overnight. The yen
weakened to 154.39 leading to fresh worries over intervention and comments from
officials.
Japanese Finance Minister Shunichi Suzuki said on Tuesday he
was closely watching currency moves and will provide a "thorough response
as needed" after the dollar surged to a fresh 34-year high.
Carol Kong, a currency strategist at Commonwealth Bank of
Australia, said elevated oil prices and expectations of higher for longer U.S.
interest rates are underpinning dollar/yen.
"The dollar/yen remains at risk of pulling back sharply
should the Ministry of Finance decide to step into the FX markets and buy JPY.
The weaker the JPY stays, the higher the risk that the Bank of Japan will
deliver an earlier rate hike in our view."
All eyes during Asian trading hours will be on China GDP
along with industrial activity, fixed asset investment, retail sales and
property market data.
"The property market has yet to confirm a bottom, and
markets will watch the price data closely for any signs of stabilisation; a
bottoming out of housing prices would be a positive sign of sentiment
recovery," ING economists said.
In commodities, U.S. crude rose 0.63% to $85.95 per barrel
and Brent was at $90.63, up 0.59% on the day on rising tensions in the Middle
East.
Spot gold added 0.1% to $2,385.88 an ounce.
0 comments:
Post a Comment