SINGAPORE: Asian stocks snapped a three-day winning streak on Tuesday, falling with mixed Chinese trade data and wavering enthusiasm about a peak in global interest rates - though a hike in Australia was taken as likely to be the last in its cycle.
Stubbornly high inflation last quarter had markets expecting the 25 basis point hike from the Reserve Bank of Australia, but a softening of language about the outlook rallied bonds and dragged on the Aussie dollar on bets hikes were now finished.
The Aussie was last 0.5% softer at $0.6460.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2% following a three-day rally that lifted the benchmark by nearly 6%.
South Korean shares fell 3% as traders unwound some of Monday’s surge on the reimposition of a short-selling ban.
Japan’s Nikkei fell 1.1%.
China’s imports unexpectedly grew in October, while exports contracted at a quicker pace, in a mixed set of indicators that showed the recovery in the world’s second-largest economy remains uneven. The Shanghai Composite fell 0.4%.
Treasuries were broadly steady in Asia, having unwound a little of last week’s rally on Monday.
Ten-year yields hovered at 4.92% - about 10 basis points above where they closed on Friday, but below where they were a week earlier.
Overnight the Nasdaq logged a seventh straight session of gains - its longest streak since January - though its gain was a slender 0.3% as the rally loses some steam. S&P 500 futures and European futures each fell 0.2%.
Asian stocks stutter ahead of Fed, frail yen in focus
“It continues to be a tug-of-war between markets and the Fed, as the latter has suggested that higher long-end yields would … do the job of policy tightening for them,” said Nicholas Chia, macro strategist at Standard Chartered.
“Markets probably fret that lower yields would force the Fed to re-think about an extended pause.”
Slow down
In foreign exchange markets the Aussie dollar was the biggest mover in the Asian timezone and Australian government bonds also rallied at the short-end as traders took the RBA’s language as a signal rate hikes were likely finished.
“It was a dovish hike…it’s not pointing to any immediate need for a follow-up,” said RBC Capital Markets rates strategist Rob Thompson on the phone from Sydney.
Elsewhere a slightly stronger dollar has pushed the Japanese yen back to the weak side of 150 to the dollar, and it hovered at 150.2 in the Asia session.
The euro took a breather at $1.0710 and analysts expect any prospective decline in the greenback to be bumpy and modest, even if the Fed starts cutting rates next year.
The US dollar index was steady at 105.36.
“Outside of monetary policy, it is weak global growth and abundant geopolitical risks ranging from Taiwan to the Middle East and Russia that we see as providing continued safe-haven support to the dollar, slowing a dollar down cycle,” said Deutsche Bank strategists Alan Ruskin and George Saravelos.
In commodity markets oil steadied with Brent crude futures at $84.75 a barrel, supported by nerves that conflict in the Middle East could expand and threaten supply and as Russia and Saudi Arabia reaffirmed production cuts. Gold nursed modest losses at $1,972, while bitcoin hovered just shy of $35,000. Reuters
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