(Correct paragraph 7’s name of the bank to ING)
HONG KONG / WASHINGTON (Reuters) – Asian equities earlier reversed gains on Tuesday, falling through declines in Chinese markets, shocked by a new round of sanctions, after inflation fears helped broaden sentiment in the region.
Investors are now awaiting a close succession to Congress by U.S. Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen.
The negative sentiment seems to weigh on European equities, as EUROSTOXX 50 futures facilitate 0.42% and FTSE futures 0.61%.
S&P 500 futures fell 0.28%.
MSCI’s broadest Asia-Pacific stock index outside Japan fell 0.76%, hit by a 1.42% drop in Chinese blue chips.
The United States and others, including the European Union, approved Chinese officials on Monday over human rights abuses in Xinjiang, and Beijing struck back with sanctions against European lawmakers, diplomats, institutes and families.
“The fall could be due to the sanctions,” said Iris Pang, chief economist for Greater China at ING Wholesale Banking. “More pressure from international politics is going to affect the asset markets.”
Jin Jing, an analyst at China Fortune Securities, said sanctions hurt the risk appetite, especially for foreign investors who sold shares via the Stock Connect.
Persistent concerns about tightening policy at home also continue to weigh heavily on sectors and stocks with high valuations, as investors have become cautious.
Hong Kong’s Hang Seng index also fell 1.62%, attracting traders’ attention through a low market debut for Baidu in which the Chinese technology giant’s shares barely traded above their secondary listing price.
Outside China, Asian stocks were mixed. Japan fell 0.61% and Australia 0.11%, both of which followed Wall Street’s gains earlier in the night, but emerging markets in the region fared better.
The Dow Jones industrial average rose 0.32%, the S&P 500 rose 0.70% and the Nasdaq Composite added 1.23%, helped by a drop in treasury yields.
Benchmark 10-year notes last returned 1.6717%, up from 1.732% late Friday.
Powell, speaking in preparation for a congressional hearing, said the US recovery “has progressed faster than generally expected and looks set to intensify”.
“The FOMC last week set out quite clearly what the Fed’s view on rates is … the next thing the markets will focus on is perhaps getting information from Yellen regarding further infrastructure investment,” Alex Wolf said. chief investment officer, said. strategy for Asia at JP Morgan Private Bank, citing a statement from the Federal Open Market Committee.
The dollar rose slightly against a basket of six major currencies that last traded at 91,887, falling 0.32% on Monday as it advanced against the kiwi, Aussie and sterling.
The New Zealand dollar reached a three-month low after the government introduced taxes to curb housing speculation. A move that investors reckoned with could enable the central bank to keep interest rates lower for longer with less risk to a property.
Oil has also fallen amid widespread supply and concerns that new pandemic curbs and the slow vaccination of vaccines in Europe will delay a recovery in fuel demand.
US West Texas Intermediate Crude Oil Futures
(This story corrects paragraph 7’s name of the bank after ING)
Reporting by Alun John in Hong Kong Chris Prentice in Washington; Additional reporting by Luoyan Liu in Shanghai; Edited by Sam Holmes and Gerry Doyle