Asia shares fall on hawkish fears of central bank hikes

Hong Kong, Feb. 22 (Reuters) – Asian shares fell to a 47-day low on Wednesday as interest rates and geopolitical tensions weighed on riskier assets.

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

Japan’s Nikkei (.N225) fell 1.32%, following a Tuesday Purchasing Managers’ Index report that showed the factory sector contracted.

The Bank of Japan (BOJ) said on Wednesday that 10-year Japanese government bonds touched 0.505% for a second straight session, breaching the BOJ’s 0.5% limit and saying it would buy emergency bonds in a move to curb higher yields. Jan. 18 to more. read more

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

Wall Street posted its worst performance of the year on Tuesday, as an unexpectedly strong reading from S&P Global’s composite PMI showed the U.S. economy has yet to cool down.

“The market is concerned that central banks will need to raise interest rates a lot more to control inflation,” said Kerry Craig, global market strategist at JP Morgan Asset Management.

“I think the biggest concern at the moment is the earnings outlook and how much it’s actually going to go down from here, versus the uncertainty around the probability of a recession in the US.”

Russian President Vladimir Putin has warned the West over Ukraine by suspending his last major nuclear arms control deal with the United States. The US Secretary of State said that this action by Putin was very unfortunate and irresponsible.

“This (nuclear deal suspension) has fueled concerns about the next round of escalation, prompting a response from President Biden in Poland, pledging more support to Ukraine, saying Russia will never win the war,” Saxo Markets’ APAC strategy team said in a client note. “After being accused of supplying arms to Russia, the focus is now on China, which must back up its peace treaty words with action.”

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

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

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

US 10-year notes touched 3.966%, the highest since November, before easing to a yield of 3.948% on Wednesday.

The dollar index was flat, but analysts expect interest rates to rise to boost the dollar, which hurts emerging market stocks, which have benefited from the dollar’s decline.

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

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

Report by Selena Li; Editing by Bradley Perrett

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