SINGAPORE- Asian stocks fell on Wednesday, with a robust dollar keeping the yen, yuan and the euro pinned near multi-month lows as traders wagered the Fed will likely be slow in cutting rates after data showed the US economy remained stable.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, with Japan’s Nikkei down 0.1 percent. On Wall Street, all three main indexes finished lower as the data stoked worries of a rebound in inflation.
The downbeat mood is set to continue in Europe, with Eurostoxx 50 futures down 0.3 percent and German DAX futures 0.18 percent softer.
Rising bond yields will likely weigh on tech stocks in Europe as well after they touched a more than five-month high on Tuesday.
Investor focus in 2025 has been on shifting US rate expectations, the growing divergence in policy path between US and other economies and the threat of tariffs once President-elect Donald Trump steps into the White House on Jan. 20.
The Fed in December projected just two rate cuts for 2025, lower than the four it had earlier predicted. Markets are currently pricing in even less than that at 38 basis point with the first cut fully priced in for July.
The European Central Bank on the other hand is expected to make deep rate cuts, with traders pricing in 99 bps of easing this year, even though inflation in euro zone accelerated in December, data showed on Tuesday.
That has left the euro close to the over two-year low of $1.022475 it touched last week. It last bought $1.035375, with investors worried the single currency may fall to the key $1 mark this year due to tariff uncertainties.
The yen was last at 158.12 per dollar after touching 158.425 on Tuesday, a level last seen in July when Tokyo intervened to support the yen. It slid more than 10 percent last year against the dollar and has had a rough start to 2025.
China’s blue chip CSI300 Index fell more than 1 percent to touch an over three month low on Wednesday in a stuttering start to the year that has seen regulators and authorities rush out to soothe investors’ nerves to no avail so far.
