SINGAPORE- Asian equities and the dollar struggled to find direction on Tuesday, with attention squarely on the timing and pace of US monetary policy normalization, but investors took some comfort from a late rebound in US stock markets.
Federal Reserve Chair Jerome Powell appears before the Senate Banking Committee on Tuesday for consideration to a second four-year term as head of the Fed, followed by a hearing with vice chair nominee Lael Brainard on Thursday.
The fast spread of the Omicron variant of the coronavirus is also weighing on markets as US hospitalizations due to COVID-19 reached a record high on Monday.
MSCI’s broadest index of Asia-Pacific shares outside Japan slipped as much as 0.3 percent before trading steady.
The Nikkei index fell 1.3 percent as trading resumed after a holiday on Monday. Australian stocks shed 0.8 percent, Taiwan lost 0.4 percent and Seoul lost 0.3 percent.
Hong Kong ticked 0.1 percent higher and China’s 300 index nudged up.
US December consumer inflation data is due to be released on Wednesday, with headline CPI seen coming in at a red-hot 7 percent on a year-on-year basis, boosting the case for interest rates to rise sooner rather than later.
But Hou Wey Fook, chief investment officer at DBS Bank, said he did not think inflation was in a “runaway situation”.
“There are a lot of shorter term drivers like the global supply chain and economies re-opening,” said Hou.
“Once we have some normalization of those things, inflation should kind of come back down to more reasonable levels and the Fed will probably not be too aggressive,” he said.
The Fed in December flagged plans to tighten policy faster than expected in response, with a rate hike perhaps as soon as March.
