By Alun John
HONG KONG, July 19 (Reuters) – Asian stocks fell on Tuesday, after overnight declines on Wall Street, and the dollar hovered below last week’s peak, but traders’ main aim was to approach the central bank meetings and the early stages of the earnings season in the United States. .
MSCI’s broadest index of Asia-Pacific stocks outside of Japan fell 0.46%, pulling back some of the previous day’s 1.8% gain and heading back to a two-year low on the last week.
Asian tech stocks like Alibaba Samsung and Nintendo contributed to the decline, after U.S. stock markets closed lower overnight, impacted by reports of Apple expecting to slow growth in hiring and spending this year. next.
Yet in a sign markets were struggling to find firm direction, U.S. S&P and Nasdaq futures each rose around 0.3% in early Asian trade, and Japan’s Nikkei gained 0, 8% after being on vacation for Monday’s rally.
“It’s kind of like ‘paint by numbers’ right now, you have a picture to fill in, but we don’t have all the colors yet,” said Kerry Craig, global market strategist at JPMorgan Asset Management.
“A few things are missing (such as) the direction of the US labor market and unemployment rate, and if central banks will step back and say ‘this is the peak of inflation and we don’t have no need to be so belligerent’, or ‘we’re going to be really aggressive'”.
Markets are expecting a sharp 75 basis point interest rate hike at the US Federal Reserve meeting next week, moving away from flirting with the possibility of a huge 100 basis point hike base, although market prices still point to a 30% chance, according to the CME. Fedwatch tool.
The 100 basis point decline in expectations at the end of last week helped stocks gain in the United States on Friday and in Asia and Europe on Monday.
The European Central Bank and the Bank of Japan both meet on Thursday, with the ECB widely expected to start raising rates from their pandemic-era lows with a 25 basis point hike, while little change is expected. expected from the ultra accommodating BOJ.
“In the background we have the earnings season in the United States and we expect that to be another source of pressure on the markets, as we believe that the full year forecast for around 9% to 10% of the United States is too high,” Craig said.
Goldman Sachs Group Inc has warned overnight that it could slow hiring and cut spending as the economic outlook deteriorates after reporting a 48% drop in quarterly profits. But, as it beat analysts’ expectations, its shares rose 2.5%.
In currency markets, the dollar continued its slow retreat from last week’s two-decade high.
The euro was worth $1.0143 after recovering from its brief dip below a US dollar last week for the first time since 2002, and a dollar bought 138.34 Japanese yen, below its highest 24-year high of 139.39 also reached last week.
The US benchmark 10-year yield was at 2.9781%, having struggled so far this month to break far in either direction from the 3% level.
The two-year yield was 3.1702%.
Oil, another asset class struggling to find a clear direction, was trading flat after paring early losses, after gaining 5% overnight.
Brent crude was at $106.30 a barrel and US crude at $102.58. Spot gold remained weak at $1,706 an ounce.
(Edited by Christian Schmollinger)