Asian shares fall on US rate scare, yen plumbs 34-yr low
Asian shares tracked Wall Street lower yesterday as sticky US inflation forced markets to slash bets on how much the Federal Reserve might ease this year, sending the dollar flying to a 34year high against the beleaguered yen.
Europe is set for a subdued open ahead of the European Central Bank (ECB) meeting, with EUROSTOXX 50 futures little changed. The ECB is all but certain to hold rates steady but the focus is on whether officials would back a rate cut in June.
In Asia, MSCI'S broadest index of Asia-pacific shares outside Japan slipped 0.3 per cent, paring some earlier losses, while Japan's Nikkei dropped 0.5 per cent.
Chinese shares eked out some gains even as data showed consumer prices in the world's second-largest economy rose by a muted 0.1 per cent in March from a year ago, versus a 0.7 per cent rise in February.
The blue chips rose 0.3 per cent while the Shanghai Composite Index gained 0.6 per cent thanks to resources stocks. Hong Kong's Hang Seng index, however, lost 0.4 per cent.
US stock futures, were little changed after Wall Street fell around 1 per cent overnight. Treasuries also steadied after yields surged 20 basis points to their highest levels since November.
Data overnight showed US inflation in March once again came in hotter than expected, decimating the chance of a rate cut in June. Core CPI advanced 0.4 per cent, above rise.
Investors, who had been hanging onto the expectation of a June cut, now see September as the most likely time for the easing cycle to start.
forecasts of a 0.3 per cent
The total easing expected this year fell to just 42 basis points, lower than the Fed's projection of 75 basis points. The chance of the Fed not cutting at all this year rose to 13 per cent, from 2.1 per cent a day earlier, according to CME Fedwatch.
"While clearly not the data policymakers would be hoping for, for equities things haven't really changed – the 'Fed put' remains well and truly alive," said Michael Brown, senior research strategist at Pepperstone.