Asian shares follow Wall Street lower

Sydney — Asian shares tracked Wall Street lower on Wednesday as US yields held near four-month highs, while a powerful earthquake in the region raised concerns about possible disruptions to the vital chip-making industry.

Markets are also pondering the risk of slower rate cuts ahead of US data and an appearance by the world’s most powerful central banker later in the day. Oil extended its ascent, while gold prices hit another record high.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%. Japan’s Nikkei dropped 1%, after a 20% blockbuster rally in the first quarter.

Taiwan’s shares skidded 0.8% after a powerful earthquake with a magnitude of 7.2 rocked Taipei, the capital, sparking a tsunami warning for the islands of southern Japan and the Philippines.

Shares of the chip giant Taiwan Semiconductor Manufacturing fell 1.4% after the company said some facilities were evacuated following the quake.

China’s blue chips eased 0.3% while Hong Kong’s Hang Seng index fell 0.6%, even as a private survey showed that the expansion in the services industry picked up pace in March.

On Wall Street, a recent run of solid US economic data — including an unexpected expansion in the manufacturing sector and the slow easing in the labour market — has stoked doubts about the amount of Fed rate cuts likely to happen in 2024 and 2025.

A pair of Fed policymakers on Tuesday both said they thought it would be “reasonable” to cut US interest rates three times in 2023, but markets expect only about 69 basis points (bps) in easing.

“At this last meeting, they still indicate three times, but these movements tend to have some momentum. As they start to shift, you find that they will probably shift again next meeting and then by next meeting, they probably will be indicating that they’re going to cut only twice,” said Andrew Lilley, chief rates strategist at Barrenjoey in Sydney. “And there’s a very high chance of one in three, that they don’t ease at all.”

The three major Wall Street indices fell about 0.7%-1%. Tesla shares lost about 5% after quarterly deliveries fell for the first time in nearly four years.

Long-term treasury yields climbed to multi-month highs overnight before paring some of the movements. The benchmark 10-year yield was last at 4.3471% on Wednesday, after hitting a four-month high of 4.405% overnight.

Investors now await eurozone inflation data, which could surprise on the downside after German inflation eased more than expected. In the US, a private payrolls report and a services sector survey are the key data risks, along with a speech from Fed Chair Jerome Powell on the economic outlook.

In currency markets, the dollar failed to get a lift from higher yields but still loomed large against major peers. The yen was jittery at ¥151.50 to the dollar, just a whisker away from the ¥152 level that prompted authorities to intervene in late 2022.

Oil gained for a fourth straight day as escalating geopolitical tensions fuelled worries about tighter supplies ahead of an Opec+ meeting where the group is unlikely to change output policy. Brent eased 0.2% to $87.18 a barrel, while US crude lost 0.3% to $83.21 a barrel.

Gold prices extended their record rally on Wednesday. Spot gold hit an all-time high of $2,288.09/oz earlier in the session before running into some profit-taking and was last flat at $2,277.99.

Reuters