Asian shares slide on US rate cut rethink nd

Asian stocks sank and the dollar climbed to more than five-month highs yesterday as stronger-than-expected US retail sales for March further reinforced expectations that the Federal Reserve is unlikely to be in a rush to cut interest rates this year.

Geopolitical tensions in the Middle East kept risk sentiment in check, lifting prices of gold and oil, while data showed China's economy grew 5.3 per cent in the first quarter year-on-year, easily beating analysts' expectations. China stocks fell, tracking broader markets, with the blue-chip index down 1 per cent, while Hong Kong's Hang Seng Index slid 2 per cent.

Stock bourses across Asia fell sharply, with MSCI'S broadest index of Asia-pacific shares outside Japan plunging more than 2 per cent to two-month low of 518.03.

The sombre mood is set to continue in Europe, with Eurostoxx 50 futures down 1.30 per cent, German DAX futures down 1.15 per cent and FTSE futures down 1.28 per cent.

US stocks closed sharply lower on Monday as a jump in Treasury yields weighed on sentiment amid concerns about rising tensions between Iran and Israel. E-mini futures for the S&P 500 fell 0.14 per cent.

Israelis awaited word on how Prime Minister Benjamin Netanyahu would respond to Iran's first-ever direct attack on their country. Netanyahu on Monday summoned his war cabinet for the second time in less than 24 hours to weigh a response to Iran's weekend missile and drone attack, a government source said.

"The markets have come alive with the sound of derisking, deleveraging, hedging and broad managing of risk exposures," said Chris Weston, head of research at Pepperstone. "There is certainly not much in the news flow to inspire risk-taking and there is a growing list of factors to refrain from buying and to manage exposures."

US retail sales rose 0.7 per cent last month, the Commerce Department's Census Bureau said on Monday, while economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rise 0.3 per cent.

The stronger-than-expected data comes after a report last week underscored inflation remains stickier than markets had expected, leading to a drastic scaling back of rate cuts this year. Traders now anticipate 45 basis points of cuts this year, down from more than 160 bps in expected easing at the start of the year.