• Asian-Pacific shares remain mostly on the back foot as US Treasury bond yields rally to multi-day high.
  • Virus woes escalate in Japan, BOJ keeps monetary policy unchanged while raising price outlook.
  • China’s PBOC braces for rate cut after MLF reduction, financial market risks loom.
  • Australia reports record virus-led death toll, New Zealand Business Confidence eased.

Markets in the Asia-Pacific region remain sluggish, mostly pressured, during early Tuesday in Europe as the firmer US Treasury yields joined upbeat oil prices. On the same line are concerns relating to the South African covid variant, namely Omicron, as well as the Fed rate hike.

That said, the US 10-year and 5-year Treasury yields refresh two-year highs while the 2-year bond coupon jumps to the February 2020 levels at the latest. Also portraying the risk-off mood is the S&P 500 Futures drop, 0.45% by the press time.

Behind the moves could be the slide in the Fed Fund Futures rate. “Fed fund futures extend slide as December 2022 implies rates of 1.05%, July 2023 near 1.50%,” said Reuters. Escalating bets on the faster rate hikes propel the US bond yields.

Elsewhere, Australia reports the biggest daily death toll due to the covid, China braces for tighter activity controls in Tianjin. Further, Japan’s Tokyo also braces for quasi-emergency together with the other nine prefectures.

Talking about data, the Bank of Japan (BOJ) revised up inflation outlook while keeping the monetary policy unchanged. Further, New Zealand’s NZIER Business Confidence for the fourth quarter (Q4) dropped to -28% versus -11% prior.

Amid these plays, MSCI’s index of Asia-Pacific shares outside Japan drops 0.50% whereas Japan’s Nikkei 225 declines 0.25% by the press time.

Australia’s ASX 200 and Hong Kong’s Hang Seng print mild losses at the latest while China manages to print mild gains amid hopes of further easy money policies to defend the domestic financial market on fresh risks from the key developers.

Elsewhere, New Zealand’s NZX 50 and India’s BSE Sensex struggle for clear direction whereas South Korea’s KOSPI and Indonesia’s ISX Composite print around 0.80% losses each at the latest.

Looking forward, US NY Empire State Manufacturing Index for January and NAHB Housing Market Index will decorate the calendar whereas bond yields and virus updates will be important too.

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