HONG KONG / WASHINGTON (Reuters) – Asian stocks canceled earlier gains on Tuesday, dragged down by falling Chinese markets, which were rocked by a new round of sanctions, after lower inflation fears had helped to strengthen the general feeling in the region.
Investors are now awaiting an appearance in Congress closely watched by US Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen.
Negative sentiment looks set to weigh on European equities with EUROSTOXX 50 futures down 0.42% and FTSE futures down 0.61%.
Futures contracts on S&P 500 fell 0.28%.
The largest MSCI index of Asia-Pacific stocks outside of Japan fell 0.76%, penalized by a 1.42% drop in Chinese blue chips.
The United States and others, including the European Union, sanctioned Chinese officials for human rights abuses in Xinjiang on Monday, and Beijing retaliated with punitive measures against lawmakers, diplomats, institutes and families Europeans.
“The drop could be due to the sanctions,” said Iris Pang, chief economist for greater China at ING Wholesale Banking. “Increased international political pressure will affect asset markets.”
Jin Jing, analyst at China Fortune Securities, said the sanctions hurt risk appetite, especially for foreign investors, who have sold shares through Stock Connect.
Persistent fears of tightening domestic policies also continued to weigh on high-flight sectors and high-valued stocks as investors became cautious.
Hong Kong’s Hang Seng Index .HSI also fell 1.62%, with traders’ attention drawn to a lukewarm start in Baidu’s market, in which shares of the Chinese tech giant were barely trading. above their secondary listing price.
Beyond China, Asian shares were mixed. Japan fell 0.61% and Australia fell 0.11%, both of which had previously followed overnight gains on Wall Street, but emerging markets in the region performed better.
The Dow Jones Industrial Average rose 0.32%, the S&P 500 0.70% and the Nasdaq Composite .IXIC 1.23%, helped by lower yields on treasury bills.
Benchmark 10-year notes last fell 1.6717%, against 1.732% on Friday night.
Powell said in remarks prepared for a congressional hearing that the US recovery has progressed “faster than expected and appears to be strengthening.”
“Last week the FOMC laid out quite clearly the Fed’s point of view on rates… the next thing the markets will focus on may be to get details from Yellen regarding further investments in infrastructure, ”said Alex Wolf, Head of Investments. strategy for Asia at JP Morgan Private Bank, referring to a statement by the Federal Open Market Committee.
The dollar appreciated slightly against a basket of six major currencies = USD last trading at 91,887, after slipping 0.32% on Monday, while advancing against the Kiwi, Aussie and Pound sterling.
The New Zealand dollar hit a three-month low after the government introduced taxes to curb property speculation, a move investors estimated could allow the central bank to keep interest rates lower for longer with less risk of a real estate bubble.
Oil has also fallen amid plentiful supply and fears that further brakes on the pandemic and slow vaccine deployments in Europe are slowing the recovery in fuel demand.
West Texas Intermediate U.S. Crude Oil Futures
(This story corrects paragraph 7 of the name of the bank at ING)