SINGAPORE- Stocks steadied in Asia on Wednesday as Shanghai emerged blinking from two months of lockdown and a dip in oil prices dangled the prospect of a respite from rising energy prices, but nerves about inflation kept investors and bond markets on edge.
Soaring food and energy costs drove eurozone inflation to a record-high 8.1 percent in May, overnight data showed, beating market expectations and stoking concern about rate rises not just in Europe but globally.
Two-year German bund yields hit their highest in over a decade as investors sold out.
Benchmark 10-year Treasury yields rose 10 basis points (bps) and were up a further 2.5 bps to 2.8749 percent early in the Asia session.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.1 percent and Japan’s Nikkei rose 0.5 percent.
S&P 500 futures bounced 0.5 percent after the index slid 0.6 percent on Tuesday. The US dollar, meanwhile, has steadied after sliding in the second half of May and it rose slightly against the euro and the yen in early trade on Wednesday.
The US Federal Reserve begins shrinking assets holdings built up during the pandemic on Wednesday and traders expect it will raise rates by 50 bps at meetings this month and next.
“Markets are pricing in rate hikes in June from the UK, US, Sweden, Australia and Canada,” said SocieteGenerale analyst Kit Juckes.
“The more the markets focus on the inflation data and central bank action, the more likely it is that we have a bumpy start to the summer in risk sentiment and a strong one for the dollar.”
The Bank of Canada is expected to raise its benchmark target rate 50 bps to 1.5 percent when it meets later in the day.
Australian economic growth slowed in the first quarter, data showed on Wednesday, but domestic demand helped it come in a bit better than expected, setting the scene for more hikes in interest rates. — Reuters
