Asian shares lower on Fed’s hawkish remarks; the risk of recession weighs on commodities, oil

HONG KONG, Jan 10 (Reuters) – Asian shares fell on Tuesday, with commodities giving up recent gains on China’s reopening and oil trading lower after hawkish comments from two U.S. Federal Reserve officials overnight, with investors cautious before key inflation data.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) down 0.17%.

“The main theme overnight was caution in the equity space, as stocks pared gains following hawkish comments from two Fed officials. Rafael Bostick and Mary Daly said the Fed is likely to raise (interest) rates to above 5% and keep them there for some time,” Commerzbank said in a client note.

The S&P500 index (.SPX) started the week on a bullish note with a more than 1.4% gain in early US trade on Monday before giving up all gains to close slightly lower.

U.S. Treasuries and the U.S. dollar remained under pressure, with the U.S. 10-year yield rising 2.23 basis points on Tuesday to 3.5393 percent, from 3.517 percent late Monday.

The dollar index was unchanged.

“Sentiment may turn more cautious ahead of the US CPI (consumer price index) release on Thursday, reducing ‘risk on’ trades initiated on optimism surrounding China’s reopening,” Mizuho Bank said in a note.

If U.S. consumer price data confirms the cooling seen in the latest monthly jobs report, Atlanta Federal Reserve Bank President Bostick said he would have to take the quarter-point increase “more seriously and continue in that direction.” Read more

Chinese shares snapped a six-session winning streak on Tuesday, while Hong Kong shares jumped to a six-month high. Any optimism may be short-lived, however, said Trinh Nguyen, emerging Asia economist at Natixis in Hong Kong.

“I think what would temper a lot of that optimism coming in is really the reality of that opening.” Even in Hong Kong, even though it is officially open, the issuance of visas is quite slow,” Nguyen said.

Benchmark of China (.CSI300) rebounded from earlier losses to gain 0.15%, while losses on Hong Kong’s Hang Seng (.HIS) tapers to 0.15%.

Prices of most base metals fell on Tuesday from recent gains driven by the reopening of top consumer China, as traders assessed risks from a global economic slowdown and weak consumption.

Three-month copper on the London Metal Exchange was down 0.8 percent at $8,786 a tonne by 0422 GMT. Copper prices hit their highest level in more than six months on Monday, while zinc rose 5% on Monday to its highest level since December 15

Japan’s Nikkei (.N225) rose 0.35%, bucking the regional trend.

Core consumer prices in Tokyo, released on Tuesday, rose a faster-than-expected 4.0 percent in December from a year earlier, supporting market expectations that Japan’s central bank may gradually wind down its massive stimulus through a policy shift is for yield curve control. Read more

In Australia, stocks (.AXJO) lost 0.28%.

Oil fell on Tuesday on expectations of further interest rate hikes by the Fed. Read more

U.S. crude fell 0.5 percent to $74.26 a barrel, and Brent was at $79.20, down 0.56 percent.

Gold prices rose, adding 0.15% to $1,872.70 an ounce.

E-mini futures for the S&P 500 showed a slow open, down 0.17%.

Reporting by Selena Li; Editing by Muralikumar Anantharaman

Our standards: Thomson Reuters Trust Principles.

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