SINGAPORE- Asian shares extended a global sell-off on Wednesday, while the dollar and Treasury yields jumped as traders pared back expectations for the pace and scale of rate cuts by the Federal Reserve this year.
The latest shift in rate expectations came after an upside surprise in US inflation on Tuesday which showed the consumer price index (CPI) rising 3.1 percent on an annual basis, above forecasts for a 2.9 percent increase.
Futures now point to about 90 basis points of easing priced in for the Fed this year, compared to 110 bps prior to the data release and 160 bps at the end of last year.
That kept pressure on global stocks, which had rallied strongly towards the end of last year on aggressive bets for rate cuts by major central banks globally in 2024.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 percent and was headed for a fifth straight day of losses.
S&P 500 futures edged 0.06 percent higher, while Nasdaq futures gained 0.11 percent . EUROSTOXX 50 futures lost 0.23 percent .
“The stronger data pushes back on the hope of a rate cut from the Federal Reserve any time soon,” said Daniela Hathorn, senior market analyst at Capital.com.
“We’ll likely have to wait for the second half of the year for the Fed to start cutting, but the issue isn’t so much whether the bank will cut rates this year, as that is an almost certainty at this point, but how many rate cuts there will be.”
Even Japan’s standout Nikkei was not spared from the beating and fell 0.7 percent , after gaining 2.9 percent in the previous session and topping the 38,000 level.
The recent move higher in the Nikkei was helped in part by a sliding yen which had weakened past the key 150 per dollar level for the first time this year on Tuesday.
The yen last stood at 150.53 per dollar.
“If they do try intervention, I think it’ll be near… the (dollar/yen) high from October 2022 and the high we saw in mid-November,” said Tony Sycamore, a market analyst at IG, referring to intervention efforts from Japanese authorities to shore up the currency.
Japan’s top currency officials warned on Wednesday against what they described as rapid and speculative yen moves overnight.
