(Bloomberg) — Asian shares halted a three-day rally and bonds fell on Tuesday in a sign of sagging risk sentiment that supported the dollar.
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The MSCI Asia Pacific Index slid 1.1% as benchmarks in Japan, South Korea, Australia all declined with Hang Seng headed for the worst day in about two months. Contracts for European stocks edged lower, extending a decline in the prior session, after European Central Bank officials tamped down rapid rate cut expectations. US equity futures also slipped.
Gold edged lower, while Treasuries fell across the curve in the first trading day since Friday. 10-year yields rose around six basis points, while those for policy-sensitive 2-year debt advanced by the same amount.
The rise in US yields helped support the greenback, which strengthened for a third session against major currencies. Traders now look to Federal Reserve Governor Christopher Waller’s speech later Tuesday on whether there will be more pushback against bets of a rate cut in March.
“It might just be the market is finally out of hungover mood and having their clarity moment” that the Fed might not be cutting rates at all this year, said Mingze Wu, a currency trader at Stonex Financial Pte. in Singapore.
Oil prices were steady as continued Houthi attacks on ships in the Red Sea that are keeping tensions high in the Middle East were offset by a shaky global economic outlook and gains in the dollar. Global benchmark Brent held above $78 a barrel, while West Texas Intermediate traded below $73.
“Despite the conflict leading to the suspension of certain Red Sea routes, global oil supplies have not been significantly impacted,” Saqib Iqbal, an analyst at Trading.Biz, said in a note. “The focus shifts to key economic data releases from the US and China, providing valuable insights into potential demand.”
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In Germany, bunds fell Monday in a decline that highlights a chasm between market expectations of ECB rate cuts and a less optimistic outlook among economists. The market is pricing in around six cuts, while economists polled…
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