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Precise Investors

Tuesday, December 7, 2021
Stocks & Shares

Asia stocks drop on U.S. rate hike bets

MSCI's broadest index

MSCI’s gauge of Asia Pacific stocks outside Japan declined 0.52%, while Hang Seng Index shed 1%

Asia stocks dropped on Tuesday, tracking a retreat on Wall Street lower as traders bolstered their bets on U.S. rate hikes in 2022 after President Joe Biden picked Federal Reserve Chair Jerome Powell to lead the central bank for a second term.

MSCI’s gauge of Asia Pacific stocks outside Japan declined 0.52%, while Hong Kong’s Hang Seng Index shed 1%.

China’s benchmark CSI300 Index pared morning losses to stay just above the red, led by real estate shares after Chinese banks were told to issue more loans for property projects.

Australia’s S&P/ASX 200 outperformed, ending 0.79% higher, boosted by miners and energy stocks. Japanese markets were closed for a public holiday.

President Biden on Monday tapped Powell to continue as Fed chair, and Lael Brainard, the other top candidate for the job, as vice chair. The news initially boosted Wall Street stocks, before the market pulled back in the afternoon with the S&P 500 and Nasdaq Composite closing down from all-time highs. The dollar attracted solid support.

Powell’s current term, which has seen an emphasis on creating jobs from the prominent focus on inflation, has proven positive for risk assets, with the S&P gaining 69.7% since his appointment.

The USD looks poised to hold onto its gains post-Powell renomination as it leaves room for markets to flirt with the idea of a faster taper, analysts at TD Securities said in a note.

The U.S. rates talk kept the dollar index well supported near a 16-month peak. The greenback was also near a 4-1/2-year top versus the yen in early deals on Tuesday.

U.S. Treasury yields were led higher by two-year notes, which typically move in step with interest rate expectations. It hit its highest since early March 2020.

In commodities, spot gold added 0.19% to $1,808.4 per ounce, paring Monday’s losses. Gold prices were under pressure as Powell’s nomination drove expectations that the central bank will stay the course on tapering economic support.

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