Asian stocks brace for Fed hockey, warns of potential conflict in Ukraine

SYDNEY, Jan. 24 (Reuters) – Asian stocks fell on Monday as investors prepared for the Federal Reserve’s meeting, which should underscore that the massive cash flow that has overestimated high inventories in recent years will soon begin to emerge.

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MSCI’s broad index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) Japan’s Nikkei fell 0.7% (.N225) 0.1% Chinese blue flakes (.CSI 300) 0.4% added, probably also thanks to the recent loosening of Beijing policy.

In Europe, EUROSTOXX 50 futures are down 0.4% and FTSE futures are down 0.2%.

But Wall Street futures rose after falling last week, with S&P 500 futures up 0.7% and Nasdaq futures up 0.8%.

Affected markets are now raising the Fed this week even if there is a small chance, although the biggest expectation is that it will be 0.25% in March and another three to 1.0% by the end of the year.

“With inflation continuing to rise, the central bank is constantly removing the very tight monetary policy that has been a major drag on stock prices for more than a decade,” said Oliver Allen, market economist at Capital Economics.

Higher financial costs and attractive bond yields have weighed on technology stocks with their higher ratings, with the Nasdaq down 12% and the S&P 500 down nearly 8% this year so far.

The trip was exacerbated by a slip on Netflix, which dropped nearly 22% in vague subscriber growth forecasts, slashing its market value by $44 billion.

That’s how much losses have actually accumulated on Treasuries at the end of last week, based on speculation that the fires of market wealth, a form of Greenspan’s old alternative, may frighten the central bank.

However, Allen noted that even with the recent pullback, the S&P 500 was 40% higher than it stopped in 2019 and the Nasdaq was 60% higher.

“Investors may not believe the so-called ‘Fed Foot’ at the moment, the central bank’s tight cycle has not yet begun, and the strength of the US economy should ensure a tighter policy.”

In fact, the first reading of US GDP for the December quarter will be released this week and before the Omicron brakes are activated, annual growth is expected to be 5.4%.

Revenue season is also going well and companies reporting this week include IBM (IBM.N)Microsoft (MSFT.O)Johnson & Johnson (JNJ.N), Tesla (TSLA.O) and apple (AAPL.O).

One-fifth of the S&P 500 is expected to provide quarterly updates this week.

Although Treasuries rose at the end of last week, the 10-year yield is still up 22 basis points to 1.77% per month and not far from the recent level seen in early 2020.

The upside was generally supported by the US Dollar, which added 0.5% to a basket of 85,647 last week. The Euro traded at $1.1324, failing to sustain the recent rally at $1.1500.

“The danger is that the central bank’s report, in the face of high inflation, describes the urgent need for action in March,” said Joseph Caporso, CBA’s head of international economics.

“This will encourage markets to risk a 50 basis point hike in March, and if so, we expect an internal reaction above the January 4 high of 96.46.”

The Japanese yen shares were trading lower, reaching $113.84, near last week’s low of 113.47, benefiting from a safe haven rally.

Gold was at $1,836 an ounce, hitting a six-week high of $1,842 an ounce last week.

Oil prices rose for the fifth consecutive week to their highest levels in seven years, amid expectations that demand will be strong and supply will be low.

Brent crude rose 83 cents to $88.72 a barrel, while US crude rose 77 cents to $85.91.

Wayne Cole reports. Editing by Sam Holmes and Edwina Gibbs

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