TOKYO- Asian stocks drifted lower while the dollar held firm on Tuesday as investors awaited minutes of the Federal Reserve’s latest policy meeting to gauge the timing and extent of possible interest rate cuts this year.
Gold eased back from Monday’s all-time peak, while crude oil declined on worries of US interest rates staying high for longer as Fed officials maintained a cautious view on a recent easing of inflation.
Cryptocurrencies ether and bitcoin climbed to fresh six-week peaks amid speculation that the US Securities and Exchange Commission (SEC) may approve a spot ether exchange-traded fund (ETF).
Markets currently factor in about 41 basis points of Fed rate reductions this year, with a quarter-point cut fully priced in for November.
Traders rushed to rebuild easing bets after data earlier this month showed consumer price pressures mitigated in April, following a string of three months of upside surprises at the start of the year.
Even so, Fed officials are reluctant to declare inflation is coming under control, with Vice Chair Philip Jefferson saying on Monday that it was too early to tell if the slowdown is “long lasting,” and Vice Chair Michael Barr saying restrictive policy needs more time.
Minutes of the last Fed meeting due on Wednesday could provide valuable insight into the future policy path, although the deliberations predate last week’s softer CPI reading.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.9 percent , weighed down by the Hang Seng’s 1.9 percent pullback from Monday’s multi-month peak.
Japan’s tech-heavy Nikkei tracked overnight gains for the Nasdaq to a record high, before reversing course to trade 0.1 percent lower.
Nasdaq futures inched 0.06 percent lower. S&P 500 futures were flat after Monday’s 0.1 percent gain.
“Market sentiment remains relatively robust, with implied volatility low, supported by greater confidence in US rate cuts this year,” Kyle Rodda, senior markets analyst at Capital.com, wrote in a note.
