US stock futures drop as risk appetites hit, Asia resilient

TOKYO — US stock futures dropped but Asian shares were resilient on Monday as investors weighed the near-certain prospect of a US interest rate hike this month against news of China’s slower 2017 growth target.

Risk appetites also took a hit on rising geopolitical tensions in East Asia, as North Korea fired four ballistic missiles early in the day, while a spat between China and South Korea over missile defense deepened.

US President Donald J. Trump’s accusation that his predecessor, Barack Obama, wiretapped him also cast a shadow on US stocks as some investors view his confrontational style as distracting him from his economic agenda.

US stock futures dropped as much as 0.45%, a fairly large move for Asian trade. Japan’s Nikkei dropped 0.50% for the day. European shares are expected to follow suit, with spread-betters looking at a 0.30-0.40% fall in Germany’s DAX and Britain’s FTSE.

But MSCI’s broadest dollardenominated index of Asia- Pacific shares outside Japan was up 0.40%, with most markets in positive territory. South Korean shares also erased earlier losses to post small gains.

“Asian shares were supported in light of US rate hike expectations. Higher resource prices and relatively robust growth in China are underpinning markets,” Yukino Yamada, senior strategist at Daiwa Securities.

Federal Reserve Chair Janet Yellen on Friday all but confirmed market expectations for an interest rate rise in March, barring any sharp deterioration in economic conditions.

US money market futures are pricing in about a 90% chance the Fed will hike interest rates by 0.25 percentage point at its March 14-15 meeting, with another rate hike fully priced in by September.

“A rate hike is almost a done deal now. So the focus will be on the pace of rate hikes after that. If there’s hawkish projections, the dollar could rise further,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management. —