SINGAPORE (Reuters) – Asian stocks struggled to clear two-month lows on Wednesday, and the safe-haven dollar was firm as concerns about rising interest rates and slowing global growth kept sentiment low as markets awaited economic data to guide course plan ahead.
MSCI’s broadest index of Asia Pacific equities outside Japan (.MIAPJ0000PUS) hit its lowest level since early January at 509.4 before falling back to 511.46. Japan’s Nikkei (.N225) and S&P 500 futures were each down 0.5%.
Weaker than expected growth and inflation data in Australia sent the Australian dollar to a two-month low of $0.6696 in early trade but lifted the local stock market (.AXJO) from lows as traders scaled back interest rate expectations.
The Aussie is down nearly 6% from its eight-month high in early February.
The US dollar, which appreciated against most majors in February, has otherwise been broadly stable. After stocks gave up January gains in February while bonds slid on renewed concerns about rising interest rates, traders are looking to the next spate of economic indicators to gauge the outlook.
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Chinese manufacturing data came in stronger than expected and provided some support for the Chinese yuan. US ISM PMI numbers are due later in the day.
“The upcoming data cycle and expected central bank forecast revisions to be presented over the next 2-3 weeks will be critical in shaping the next leg of financial market trading,” analysts at ANZ Bank said in a statement.
The mixed tone of the data over the past few days appears to be causing many assets to pause at key chart levels.
Higher than expected inflation readings in Europe fueled bond selling overnight before weaker than expected US confidence numbers perhaps offered a glimmer of hope that rate hikes are biting and may be within striking distance of the peak.
Two-year Treasury yields, a guide to near-term US interest rate expectations, are close to four-month highs but are down at 4.8407% from a November peak of 4.8830%. Benchmark 10-year yields rose 3 basis points in Asia to 3.9454%.
In FX markets, aside from the Aussie’s decline, moves have been fairly muted. The euro stayed at $1.0556 and the yen drifted slightly lower to 136.46 against the dollar.
Commodities stabilized as Chinese demand hopes offset global growth worries and Brent crude was at $83.45 a barrel.
Grains have tumbled in parts of the US winter wheat belt and optimism over a Russia-Ukraine export deal prompted investors to close long positions.
Geopolitics are also keeping investors on their toes. US President Joe Biden’s visit to Kiev and Russian President Vladimir Putin’s cancellation of the last remaining nuclear arms control agreement with the US signaled a hardening of positions.
China, which signaled its support for Russia by sending its top diplomat to Moscow last week, has issued a call for peace but it has met with skepticism, and Washington has said in recent days it is concerned that China is sending arms to Russia could send.
“Should Beijing send weapons to Russia, it risks a rapid geopolitical collapse of the world economy,” said Jan Lambregts, head of research at Rabobank. “Markets haven’t even started to think about what that might mean.”
Editing by Himani Sarkar
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