Asian stocks slip on expectation of more interest rate hikes in US

27 Feb 2023 , 09:30 AM

Asian stocks fell on Monday as markets priced in ever-higher peaks for the US and European interest rates, weighing on bonds globally and driving the dollar to multi-week highs. Investors are paced up to face more difficult US data.

This week, at least six Federal Reserve policymakers will speak, providing a running commentary on the likelihood of further rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down by 0.5% after falling 2.6% the previous week. Japan’s Nikkei fell 0.4%, while South Korea fell 0.9%.

S&P 500 futures were unchanged, while Nasdaq futures rose 0.1%. The S&P 500 broke through 4,000 on Friday, retracing 61.2% of this year’s rally, thanks to robust data on spending and core prices.

According to Fed futures, the peak of the rate is now estimated to be approximately 5.42%, indicating the possibility of at least three more hikes from the current range of 4.50% to 4.75%. In addition, the projected rate ceiling for the European Central Bank and the Bank of England has been slightly raised by the markets.

Higher interest rates and yields stretch equities valuations, particularly those with high PE ratios and low dividend payouts, which includes much of the technology sector.

The possibility of decreased Russian exports was countered by mounting inventories in the US and worries about the state of the global economy, but still managed to nudge up the price of oil.

Brent rose 35 cents to $83.51 per barrel, while the US crude rose 34 cents to $76.66.

Gold suffered a 1.7% decline last week and is currently priced at $1,812 per ounce, likely due to the weight of increased dollar and yield values.

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