Asian stocks tick higher as the spotlight remains on Fed By Reuters

© Reuters. FILE PHOTO: Passers-by with protective face masks walk past an electronic board showing the world’s stock indices, amid the coronavirus pandemic (COVID-19), in Tokyo, Japan November 1, 2021. REUTERS / Issei Kato

By Scott Murdoch

MELBOURNE (Reuters) – Asian stock markets were generally higher on Tuesday, although global investors’ attention remains focused on the prospect of US rate hikes over the next few months, after two years of unique pandemic-induced policy easing.

MSCI̵[ads1]7;s broadest index of Asia-Pacific stocks outside Japan was up 0.4%, after the US market closed overnight due to the Martin Luther King Jr. holiday. The index is up 1.1% so far this month.

Australian equities rose 0.29%, while in China the CSI300 index rose 0.33% in early trading.

Hong Kong rose 0.61 percent.

The stock index traded 0.63% higher before the Bank of Japan’s decision expires between 0230-0500 GMT.

The Bank of Japan is not expected to change its stance on ultra-low interest rates, but inflation forecasts are likely to increase for 2022.

Ahead of the meeting, the dollar traded against the yen at 114.51. It is still some distance from the lowest this year at 113.49 last week.

The US Federal Reserve will meet 25-26. January, and although it is not expected to change interest rates then, a growing number of investors believe that March will be the start of a tightening cycle.

Interest rate increases are generally seen as negative for more risky assets such as equities.

“Investors’ focus is still on the Fed and the pace at which they are raising interest rates,” John Milroy, an adviser at Sydney’s Ord Minnett brokerage, told Reuters.

“We believe it will go faster than the markets currently expect. There is still a boom in the US with a tight labor market. Good for world growth, but increasing inflationary pressures.”

The outlook for higher US interest rates also played out in the fixed income markets on Tuesday, after the US market closed on Monday.

In the Asian cash market on Tuesday, two-year interest rates rose above 1% for the first time since February 2020.

Two-year interest rates follow short-term interest rate expectations and were last up 3.7 basis points (bps) at 1.0054%.

Five-year interest rates rose by 3.6 bps to 1.5960%, the highest since January 2020. The reference interest rates for 10 years rose by approx. 2 bps to 1.8108% at the beginning of the Tokyo trade.

The one that follows the dollar against a basket of currencies from other major trading partners was up to 95,254.

ticked up 0.49% to $ 84.23 per barrel. rose to $ 86.53 per barrel.

Gold was a little lower. traded at $ 1,818.2274 per ounce. [GOL/]

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