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Asian stocks, dollar hunt for direction as investors look to Fed policy

Pedestrians wearing face masks walk near an overpass with an electronic board displaying inventory information, following the outbreak of the coronavirus disease (COVID-19), at Lujiazui Financial District in Shanghai, China, March 17, 2020. REUTERS/Ali Song

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  • Asian stock markets:
  • Nikkei fell 0.9%, resumed trading after the holiday
  • Futures indicate a strong opening for European stocks
  • Traders brace for US inflation data

SINGAPORE (Reuters) – Asian stocks and the dollar struggled to find direction on Tuesday as investors awaited Federal Reserve Chairman Jerome Powell’s appearance before the Senate Banking Committee, hoping for clues on the timing of an expected policy tightening.

Powell is seeking a second four-year term as Federal Reserve Chairman, and his appearance before the committee will follow a hearing with Vice Presidential candidate Lyle Brainard on Thursday. Read more

EUROSTOXX 50 futures rose 0.6% and FTSE futures rose 0.3%, indicating a strong opening for European stock markets.

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Global markets were on edge due to inflation risks, but Ho Wei Fook, chief investment officer at DBS Bank, said he did not think inflation was in a “runaway mode”.

“There are a lot of short-term drivers such as global supply chain and economic reopening,” Hu said.

“Once we have some normalization of these things, inflation should sort of go back to more reasonable levels and maybe the Fed won’t be so aggressive,” he said.

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.2% after falling 0.3%.

The Nikkei (.N225) is down 0.9% as trading resumes after Monday’s holiday. Australian shares (.AXJO) declined 0.8%, Taiwan (.TWII) shares rose 0.3%, and Seoul (.KS11) shares were flat.

Hong Kong (.HSI) is up 0.1% and China 300 (.CSI300) is down 0.8%.

US consumer inflation data for December will be released on Wednesday, with the headline CPI hitting 7% y/y, strengthening the case for higher interest rates sooner rather than later.

Futures contracts for the S&P 500 and Nasdaq are little changed.

The Fed in December signaled plans to tighten policy faster than expected in response, with a rate hike possibly as soon as March.

But that was before it became clear how quickly the Omicron variant could spread, as this week’s hearings were the first chance for Powell and Brainard to say how the current outbreak has affected their outlook. Read more

“We continue to believe that a March rate hike is increasingly likely. How these discussions are settled will likely have implications for interest rate increases after the takeoff,” Nomura economists said in a report, referring to US monetary policy, referring to monetary policy. American.

“In particular, we believe that comments about early runoff and less sharp rate increases support our view that the Fed will slow the pace of rate hikes to twice a year in 2023.”

Asian stocks have done relatively better so far this year. MSCI’s main index held steady, with gains in Indian and Hong Kong stocks, while Japanese and Chinese markets slipped.

US stocks had a busy first week of the year when the Federal Reserve indicated it would tighten policy faster to tackle inflation, and then the data showed the strength of the US labor market.

On Monday, the Dow Jones Industrial Average (.DJI) lost 0.45%, and the S&P 500 (.SPX) lost 0.14%. Technology stocks posted a late recovery to leave the Nasdaq Composite (.IXIC) up 0.05%.

The dollar index, which measures the currency against six currencies, hovered on Tuesday around 95,832.

It reached its highest level in more than 16 months at 96.938 on November 24 amid increased hawkishness from Fed policy makers, but has since been stuck between that level and 95,544, untouched less than a week later.

US 10-year Treasury yields reached a high of 1.8080% in US trading, levels last seen in January 2020. The yield subsequently eased back to 1.7640.

Oil prices rose on Tuesday after two days of losses. Brent crude futures rose 0.5% to $81.3 a barrel, after falling 1% in the previous session.

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(Reporting by Anshuman Daga) Editing by Anna Nicholas Da Costa and Simon Cameron More

Our Standards: Thomson Reuters Trust Principles.

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