(Corrects the name of the bank from paragraph 7 to ING)
HONG KONG / WASHINGTON (Reuters) – Asian stocks reversed earlier gains on Tuesday, dragged down by declines in Chinese markets, which were rocked by a new round of sanctions, after inflation fears helped shore up the price. broader sentiment in the region.
Investors now await an appearance before Congress led by Jerome Powell, president of the United States Federal Reserve, and Treasury Secretary Janet Yellen.
Negative sentiment looks set to weigh on European equities as EUROSTOXX 50 futures decline 0.42% and FTSE futures 0.61%.
S&P 500 futures fell 0.28%.
MSCI’s broader Asia-Pacific equity index outside of Japan fell 0.76%, hit by a 1.42% drop in China’s top-tier stocks.
The United States and others, including the European Union, sanctioned Chinese officials on Monday for human rights abuses in Xinjiang, and Beijing responded with punitive measures against European legislators, diplomats, institutes and families.
“The drop could be due to sanctions,” said Iris Pang, chief China economist at ING Wholesale Banking. “More pressure from international politics will affect asset markets.”
Jin Jing, an analyst at China Fortune Securities, said the sanctions hurt risk appetite, particularly for foreign investors, who sold shares through Stock Connect.
Lingering domestic policy tightening concerns also continued to weigh on high-flying sectors and highly valued stocks as investors turned cautious.
Hong Kong’s Hang Seng Index also fell 1.62%, with traders’ attention drawn by a tepid Baidu market debut, in which the Chinese tech giant’s shares were trading barely above their trading price. secondary.
Beyond China, Asian stocks were mixed. Japan fell 0.61% and Australia fell 0.11% as both had posted overnight gains on Wall Street, but the region’s emerging markets outperformed.
The Dow Jones Industrial Average rose 0.32%, the S&P 500 gained 0.70% and the Nasdaq Composite added 1.23%, helped by a drop in Treasury yields.
Benchmark 10-year notes last returned 1.6717%, down from 1.732% on Friday.
Powell said in remarks prepared for a congressional hearing that the US recovery had progressed “faster than expected and appears to be strengthening.”
“Last week, the FOMC laid out pretty clearly what the Fed’s view is on rates … the next thing the markets will be focusing on is getting some details from Yellen regarding increased investment in infrastructure. “said Alex Wolf, chief investment officer. strategy for Asia at JP Morgan Private Bank, referring to a statement from the Federal Open Market Committee.
The dollar gained slightly against a basket of six major currencies that traded at 91.887, after falling 0.32% on Monday, while advancing against the kiwi, the Australian dollar and the British pound.
The New Zealand dollar hit a three-month low after the government introduced taxes to curb property speculation, a move that investors estimated could allow the central bank to keep interest rates lower for longer with less risk of a bubble. real estate.
Oil also fell amid ample supply and concerns that new pandemic restrictions and slow vaccine launches in Europe will slow the recovery in demand for fuel.
US West Texas Intermediate Crude Futures
(This story corrects paragraph 7 of the bank name to ING)
Reporting by Alun John in Hong Kong Chris Prentice in Washington; Additional information from Luoyan Liu in Shanghai; Editing by Sam Holmes and Gerry Doyle