Asia shares, US futures slide as traders fret about Ukraine, rate rises; STI down 1.2%

Asian markets were being dragged lower by concerns about faster US rate hikes, mounting tensions over Ukraine, rising inflation and higher oil prices. PHOTO: AFP

HONG KONG (REUTERS) - Asian shares and United States futures tumbled on Tuesday (Jan 25) after a tumultuous Wall Street session, with investors nervous about the situation in Ukraine and eyeing the US Federal Reserve amid worries about a move to tighter monetary policy globally.

The North Atlantic Treaty Organisation said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western "hysteria" in response to its build-up of troops on the Ukraine border.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 1.2 per cent, falling to its lowest in a month, and Japan's Nikkei skidded 2 per cent to its lowest level since August.

There were sharp declines around the region. Hong Kong lost 1.64 per cent and Korea's Kospi fell 1.67 per cent.

Australia's S&P/ASX 200 tumbled 2.73 per cent to hit an eight-month low, hurt also by a high inflation print on Tuesday morning that stoked fears of approaching rate hikes Down Under.

Singapore's central bank tightened monetary policy on Tuesday in an out-of-cycle move after inflation rose at its fastest pace in eight years. The Straits Times Index was down 1.2 per cent at 10.26am local time.

UBP senior economist Carlos Casanova said Asian markets were being dragged lower by concerns about faster US rate hikes, mounting tensions over Ukraine, rising inflation and higher oil prices.

"But, on the upside, valuations are becoming more attractive and earnings growth are still robust for some sectors. So I think we will see a tug of war in the market for this week," he said.

US futures also fell in Asian hours, Nasdaq futures shed 1.2 per cent and S&P500 futures lost 0.95 per cent, after US stock markets had recovered strongly late in the session to close higher, recouping steep losses made early in the day, as bargain-seeking investors snapped up shares.

The Dow Jones Industrial Average finished up 0.29 per cent, the S&P 500 gained 0.28 per cent and the Nasdaq Composite added 0.63 per cent.

Keeping traders on their toes, the Fed will begin its two-day meeting later on Tuesday, with investors starting to speculate that there is a small possibility that they will announce a surprise rate hike.

Investors are also anxiously looking out for any hints about the timing and pace of rate hikes expected later this year. Money markets are priced for a first rate hike in March, with three more quarter-point increases by year-end.

However, US benchmark Treasuries were sitting out some of the speculation. Yields on benchmark 10 year notes were at 1.76 per cent, steady on the day, having finished a choppy day of trading Monday near where they started.

Market nerves sent the US dollar higher against most peers. The dollar index was at 95.922, hovering near a two-week high, having gained 0.29 per cent overnight.

The Aussie dollar gained briefly after the high inflation print, but failed to hold on to its gains and the risk friendly currency was still hovering near the one-month low hit the day before.

Oil prices were also elevated, further worrying stock investors. US crude rose 0.5 per cent to US$83.73 per barrel and Brent crude was at US$86.83, up 0.65 per cent.

Gold held on to its recent gains as investors sought safety. The spot price was at US$1,841 an ounce, flat on the day but near last week's two-month high of US$1,847.70.

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