Asian stocks fall on fear of hawkish central bank hikes

HONG KONG, Feb 22 (Reuters) – Asian stocks fell to their lowest level in 47 days on Wednesday as a heightened interest rate outlook and geopolitical tensions weighed on risky assets.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1.02%, touching its lowest since Jan. 6.

The Japanese Nikkei (.N225) fell 1.32%, its worst performance in about a month after a Purchasing Managers’ Index report on Tuesday showed the manufacturing sector contracted.

The Bank of Japan (BOJ) announced on Wednesday that it would carry out emergency bond purchases, in a bid to contain high yields, as Japanese 10-year government bonds hit 0.505% for a second session in a row, breaking the BOJ’s 0.5% cap and hitting the highest level since Jan. 18. read more

New Zealand’s central bank raised interest rates by 50 basis points to a more than 14-year high of 4.75%. The central bank said it expected further tightening to ensure inflation returned to its target range over the medium term. Learn more

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Wall Street posted its worst performance of the year on Tuesday, with a surprisingly strong reading of S&P Global’s composite PMI showing that the US economy was not cooling down yet.

“It’s about the market that central banks will have to raise rates a lot more to rein in inflation,” said Kerry Craig, global markets strategist at JPMorgan Asset Management.

“I think the biggest worry right now is the earnings outlook and how much it’s really going to drop from here…against the uncertainty around the likelihood of a recession in the US”

Russian President Vladimir Putin has issued a warning to the West about Ukraine by suspending its last major nuclear arms control treaty with the United States. The US Secretary of State said Putin’s decision was “deeply unfortunate and irresponsible”.

“This (suspension of the nuclear pact) has sparked the next stage of escalating concerns, citing a response from President Biden in Poland saying Russia will never win the war and pledging more support for Ukraine,” the official said. Saxo Markets APAC strategy team in a client note. “The focus is now on China needing to back up its peace treaty words with deeds after being accused of supplying arms to Russia.”

China’s benchmark index (.CSI300) lost 0.68% and Hong Kong’s Hang Seng Index (.HSI) fell 0.09%.

Australia’s S&P/ASX 200 index (.AXJO) lost 0.3% on Wednesday, falling for a second consecutive session and touching its lowest in more than a month on expectations of higher interest rates.

E-mini futures for the S&P 500 rose 0.16%.

US 10-year bonds hit 3.966%, the highest since November, before falling back to 3.948% on Wednesday.

The dollar index was flat, but analysts expect interest rate hikes to push the dollar higher, hurting emerging market stocks, which benefited from the weaker dollar.

U.S. crude fell 0.46% to $76.01 a barrel and Brent to $82.74, down 0.37%.

Spot gold added 0.1% to $1,835.28 an ounce.

Reporting by Selena Li; Editing by Bradley Perrett

Our standards: The Thomson Reuters Trust Principles.

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