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GLOBAL MARKETS-Asian stocks edge down as investors eye central bank hikes

Asian shares edged down and bonds nursed small losses on Tuesday as investors braced for an eventful week that will include central bank meetings, a slew of earnings reports and key U.S. economic data.

January 31, 2023
By Julie Zhu
31 January 2023

By Julie Zhu

Jan 31 (Reuters) – Asian shares edged down and bonds
nursed small losses on Tuesday as investors braced for an
eventful week that will include central bank meetings, a slew of
earnings reports and key U.S. economic data.

Investors broadly expect the U.S. Federal Reserve to raise
interest rates by 25 basis points (bps) on Wednesday. Interest
rate announcements are due on Thursday from both the Bank of
England and the European Central Bank – and both are expected to
hike rates by 50 bps.

Meanwhile, more than 100 S&P 500 companies, including Apple
, and Google parent Alphabet
, are expected to report results this week, which also
will see the publication of closely watched U.S. employment

“It’s a big week for both central banks and U.S. equities,
with … some of the household names due to make earnings
announcements that will provide a micro overview of the macro
economy,” ANZ analysts said in a note.

“We expect a 25 bps (U.S.) rate rise and anticipate that the
Fed will caution against an early pause in the tightening cycle
…. Risk appetite could be vulnerable to a correction.”

European markets were set for a lower open, with pan-region
Euro Stoxx 50 futures down 0.48%, German DAX futures
falling 0.47% and FTSE futures dropping 0.29%.
U.S. stock futures, the S&P 500 e-minis, were down 0.06%.

In Asia, MSCI’s broadest index of Asia-Pacific shares
outside Japan was 1.1% lower. The index is up
9.9% so far this month and is on course for its best January
performance since 2012.

Japan’s Nikkei stock index slid 0.23% while
Australian shares were down 0.15%.

China’s economic activity swung back to growth in
January, after a wave of COVID-19 infections passed through the
country faster than expected following abandonment of pandemic
controls. The official purchasing managers’ index, which
measures manufacturing activity, rose to 50.1 from 47.0 in

Investors remained cautious, however, looking for more
signs of recovery in the pandemic-hit economy. China’s blue-chip
CSI300 index was down 1% in afternoon trade after
reaching a half-year high on Monday.

While Hong Kong’s Hang Seng index dropped 1.23%
on Tuesday, it was still set to post its best January
performance since 1989.

On Monday, U.S. stocks lost ground, with the major indexes
sinking, weighed down by declines in technology and other giant
corporations’ shares.

The Dow Jones Industrial Average fell 0.8% to
33,717.09, the S&P 500 lost 1.3% to 4,017.77 and the
Nasdaq Composite dropped 2.0% to 11,393.81.

Despite Monday’s declines, the S&P 500 remained on track to
post its biggest January gain since 2019.

At the end of the Fed’s two-day policy meeting on Wednesday,
investors will be glued to Chair Jerome Powell’s news conference
for clues on whether the rate-hiking cycle may be coming to a
close, and for signs of how long rates could stay elevated.

Markets will also grapple with a flood of U.S. economic
data, culminating in Friday’s payrolls report for January.
Investors see signs of weakening in the labour market as a key
factor in bringing down high inflation.

U.S. Treasury yields remained firm ahead of the central bank
meetings and economic data, with the yield on benchmark 10-year
Treasury notes US10YT=RR standing at 3.5457% compared with its
U.S. close of 3.551% on Monday.

The two-year yield, which rises with traders’
expectations of higher Fed fund rates, touched 4.2424% compared
with a U.S. close of 4.261%.

In currencies, the U.S. dollar, which was poised for its
fourth month of declines, was slightly up at 102.29 against a
basket of other major currencies.

The European single currency was largely unchanged on
the day at $1.0841, having gained 1.3% in a month.

In the energy market, oil prices fell ahead of the expected
hikes by central banks and signals of strong Russian exports.

U.S. crude dipped 0.44% to $77.56 a barrel. Brent
crude fell to $84.85 per barrel.

Gold was slightly lower. Spot gold was traded at
$1920.84 per ounce.

(Additional reporting by Ankur Banerjee; Editing by Kenneth
Maxwell and B)

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