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Asia stocks fall after hawkish Fed comments; recession risk weighs on raw materials, oil

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

MSCI̵[ads1]7;s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down 0.17%.

“The main theme overnight was equity market caution as stocks pared gains following hawkish comments from two Fed officials. Raphael Bostic and Mary Daly said the Fed was likely to raise (rates) above 5% and keep them there for a while,” Commerzbank said in a customer note.

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

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

The dollar index remained flat.

“Sentiment may turn more cautious ahead of the US CPI (consumer price index) release on Thursday, dampening ‘risk on’ trades initiated as a result of 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 Fed Bank President Bostic said he would have to take a quarter-point increase “more seriously and move 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. However, any optimism may be short-lived, said Trinh Nguyen, emerging Asia economist at Natixis in Hong Kong.

“I think what will temper a lot of this optimism coming up is the reality of this opening. Even in Hong Kong, even though it’s officially open, the issuance of visas has been quite slow,” Nguyen said.

China’s benchmark index (.CSI300) rebounded from earlier losses to 0.15%, while losses for Hong Kong’s Hang Seng index (.HIS) narrowed to 0.15%.

Prices of most base metals fell on Tuesday from recent rallies fueled by top consumer China’s reopening, as traders gauged the risk of a global economic slowdown and weak consumption.

Three-month copper on the London Metal Exchange was down 0.8% at $8,786 a tonne by 0422 GMT. Copper prices hit their highest in more than six months on Monday, while zinc rose 5% on Monday to its highest 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% in December from a year earlier, underpinning market expectations that the Bank of Japan may phase out its massive stimulus by adjusting its yield curve control policy. read more

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

Oil fell on Tuesday due to expectations of further interest rate hikes by the Fed. read more

US oil fell 0.5% to $74.26 a barrel and Brent was at $79.20, down 0.56%.

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

E-mini futures for the S&P 500 indicated a weak open with a 0.17% drop.

Reporting by Selena Li; Editing by Muralikumar Anantharaman

Our standards: Thomson Reuters Trust Principles.

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