Asia-Pacific equities rose broadly higher while the yen fell on Tuesday after the US Federal Reserve chair suggested he would move more aggressively to tackle inflation.
Hong Kong’s Hang Seng index rose as much as 2.4 per cent, Japan’s Topix climbed 1.4 per cent and Australia’s S&P/ASX closed 0.9 per cent higher, while in South Korea the Kospi gained 1 per cent.
In Japan, stocks were supported by a softening yen, which fell 0.8 per cent against the dollar to 120.30 to hit its weakest level in more than six years.
In China, the CSI 300 index of the biggest Shanghai- and Shenzhen-listed stocks lost 0.5 per cent.
The market had rallied last week after vice-premier Liu He made a rare intervention to emphasise the government’s support for the economy and capital markets.
“I would expect more transparency and less surprise around upcoming regulation, but also less actual regulation going forward — and, in general, policies that support growth and help the Chinese economy achieve its goal of a 5.5% growth rate,” said Kristina Hooper, chief global market strategist at US fund manager Invesco.
European futures pointed to a mixed start, with FTSE 100 contracts flat and the Euro Stoxx 50 futures down 0.4 per cent.
The moves came after the yield on the 10-year Treasury hit 2.3 per cent. The US government bond market is experiencing its worst month since 2016 after higher inflation forced the Fed to raise interest rates last week.
Fed chair Jay Powell on Monday emphasised the need for tighter monetary policy, after inflation soared to a 40-year high of 7.9 per cent last month.
He said the Fed needed to move “expeditiously” towards tighter monetary policy to confront an “extremely tight” labour market and “much too high” inflation.
US stocks also dropped following Powell’s comments but recovered most of their losses, with the S&P 500 index closing down less than 0.1 per cent for the day on Monday.
“The yield spread on the two-year and 10-year US Treasuries has compressed very substantially in recent months as the Fed has become more hawkish. If this yield spread were to go negative, it might indicate that a recession is in the cards,” Hooper added.
On Tuesday afternoon in Asia, the 10-year yield was trading at 2.33 per cent. Futures for the S&P 500 were down 0.3 per cent.
In commodity markets, international oil benchmark Brent crude rose 3.1 per cent to $119.22 a barrel. The invasion of Ukraine by Russia, the world’s second-largest supplier of oil, has driven global prices sharply higher.
Gold was little changed at $1,936.89 per ounce.
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Source: Financial Times