GLOBAL MARKETS-Asian stocks slip as investors eye central bank hikes

BY Reuters | ECONOMIC | 01/30/23 09:07 PM EST

By Julie Zhu

Jan 31 (Reuters) - Asian shares traded cautiously and bonds nursed small losses on Tuesday as investors braced for an eventful week that includes central bank meetings, a slew of earnings reports and key U.S. economic data.

Investors broadly expect the U.S. Federal Reserve will raise interest rates by 25 basis points (bps) on Wednesday. Rate announcements are due on Thursday from both the Bank of England and the European Central Bank - and both are expected to hike rates by 50 bps.

Meanwhile, more than 100 S&P 500 companies including Apple (AAPL) , Amazon.com (AMZN) and Google parent Alphabet are expected to report results this week, which also will see the publication of closely watched U.S. employment numbers.

"It's a big week for both central banks and U.S. equities, with ... some of the household names due to make earnings announcements that will provide a micro overview of the macro economy," ANZ analysts said in a note.

"We expect a 25 bps (U.S.) rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle ... Risk appetite could be vulnerable to a correction."

Early in the Asian trading day, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1%. U.S. stock futures, the S&P 500 e-minis, rose 0.1%.

Japan's Nikkei stock index slid 0.1% while Australian shares were up 0.2%.

China's blue-chip CSI300 index remained flat in early trade. Hong Kong's Hang Seng index opened up 0.4%.

On Monday, U.S. stocks lost ground with the major indexes sinking, weighed down by declines in technology and other giant corporations' shares.

The Dow Jones Industrial Average fell 0.8% to 33,717.09, the S&P 500 lost 1.3% to 4,017.77 and the Nasdaq Composite dropped 2.0% to 11,393.81.

Despite Monday's declines, the S&P 500 remained on track to post its biggest January gain since 2019.

At the end of the Fed's two-day policy meeting on Wednesday investors will be glued to Chair Jerome Powell's news conference for clues on whether the rate-hiking cycle may be coming to a close, and for signs of how long rates could stay elevated.

Markets will also grapple with a flood of U.S. economic data, culminating in Friday's payrolls report for January. Investors see signs of weakening in the labour market as a key factor in bringing down high inflation.

U.S. Treasury yields remained firm ahead of the central bank meetings and economic data, with the yield on benchmark 10-year Treasury notes US10YT=RR standing at 3.5384% compared with its U.S. close of 3.551% on Monday.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.2402% compared with a U.S. close of 4.261%.

In currencies, the U.S. dollar, which was poised for its fourth month of declines, was down at 102.19 against a basket of other major currencies.

The European single currency was up 0.1% on the day at $1.0852, having gained 1.4% in a month.

In the energy market, oil prices fell on Monday ahead of the expected hikes by central banks and signals of strong Russian exports.

U.S. crude ticked up 0.2% to $78.02 a barrel while Brent crude settled at $84.9 per barrel early in the Asia session.

Gold was slightly higher. Spot gold was traded at $1922.91 per ounce.

(Editing by Kenneth Maxwell)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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