Asia Stocks Inflation, Growth Concerns; RBA hits pause

  • Asian shares fell on inflation worries, weak data trend sentiment
  • European markets are more open
  • Hong Kong shares edged lower as technology looms over Sino-US tensions

HONG KONG, April 4 (Reuters) – Asian stock markets fell on Tuesday as a sudden cut in oil production targets by the OPEC+ group left investors reeling from inflation worries, while Treasury yields fell.

The announcement on Sunday of production target cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, boosted oil prices and complicated the inflation outlook. Brent crude rose 0.44% to $85.3 a barrel, up more than 6% overnight.

Investors weighed economic data on Monday that showed U.S. manufacturing activity fell to the lowest level in nearly three years in March as new orders fell, and analysts said activity could slow further due to tighter credit conditions. read more

“There has been a weakening trend since May last year, but the recent banking turmoil may have dampened confidence further,” ANZ analysts said in a note.

“Manufacturing is one of the most rate-sensitive sectors of the economy, as goods like autos are primarily bought on credit. Encouraging news on commodity inflation continues.”

In early European trade, euro STOXX 50 futures rose 0.33%, German DAX futures rose 0.39% and FTSE futures rose 0.35%. US stock futures, the S&P 500 e-minis ESc1, were down 0.07%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 0.4%, reversing early gains.

Japan’s Nikkei stock index (.N225) rose 0.3%. In Sydney, the stock market ( .AXJO ) rose while the Australian dollar fell as the Reserve Bank of Australia paused its tightening cycle following 10 straight rate hikes.

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China’s blue-chip CSI300 index (.CSI300) was little changed at the lunch break, while the Shanghai Composite (.SSEC) rose 0.22%.

Hong Kong’s Hang Seng index fell 1.1%, led by tech stocks, as heightened Sino-US tensions weighed on investor sentiment.

China warned US House Speaker Kevin McCarthy on Tuesday to “not repeat the mistakes of the past” and to meet visiting Taiwanese President Tsai Ing-wen. read more

On Monday, gains in energy stocks helped lift global stock indexes as a surprise OPEC+ group’s new production cuts could push oil prices toward $100 a barrel. The S&P 500 energy sector index ( .SPNY ) rose 4.9%.

However, the prospect of higher oil prices added to inflation worries on Wall Street, days after evidence of cooling prices raised expectations that the US Federal Reserve will soon end its aggressive monetary tightening campaign.

The Dow Jones Industrial Average (.DJI) rose 0.98%, the S&P 500 (.SPX) added 0.37% and the Nasdaq Composite (.IXIC) fell 0.27%.

Market watchers are trying to gauge how long the Fed will need to raise interest rates to reduce inflation and whether the U.S. economy is headed for recession.

Treasury yields retreated after U.S. manufacturing data raised expectations for some investors that the Fed will cut rates later this year as the economy slows. Separate data also showed US construction spending weakened in February.

The yield on the benchmark 10-year Treasury note was at 3.4151% on Monday, compared with its US close of 3.432%.

Two-year yields rose on traders’ expectations that the Fed funds rates will be higher, touching 3.9676% compared to the US close of 3.98%.

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The dollar reversed some losses but remained on the defensive after losing ground on Monday following weak US economic data.

The focus on currencies in Asia fell on the RBA, which suspended its tightening streak as financial markets expected, although economists were more divided on the outcome.

The Aussie was flat and down 0.4% against the greenback at $0.6758.

The US dollar index, which tracks the greenback against a basket of other major trading partners’ currencies, was last at 102.16.

The dollar rose 0.2% to 132.68 against the Japanese yen, while the European single currency gained 0.5% on the month to $1.0893.

Gold fell slightly. Spot gold traded at $1980.59 an ounce.

Editing by Sri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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