Asian markets steady as investors await Fed chair's testimony

SYDNEY: Asian financial markets were little changed on Tuesday (Mar 7) as investors awaited congressional testimony from Federal Reserve Chair Jerome Powell due to start later in the day for clues on the central bank's next move on interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat after US stocks ended the previous session with mild gains. The index is up 2.9 per cent so far this month.

The yield on benchmark 10-year Treasury notes reached 3.9675 per cent, compared with its US close of 3.983 per cent on Monday.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.8945 per cent compared with a US close of 4.894 per cent.

Australian shares were 0.1 per cent lower after being down 0.3 per cent earlier in the session, while Japan's Nikkei stock index rose 0.5 per cent.

Australian stocks were dragged down by resource majors BHP Group and Rio Tinto, which analysts said were weaker on the back of China's growth target being set at about 5 per cent for 2023.

"The lack of any new stimulus measures meant China is currently content with just stabilising its economy, a move which wasn't seen as supportive for global growth," Ord Minnett analysts said.

"In response, commodity prices and commodity-related shares fell (overnight)."

The Reserve Bank of Australia (RBA) is tipped to order its tenth consecutive interest rate rise today at 2.30pm AEDT (3.30am GMT) and raise the official cash rate by 25 basis points to 3.6 per cent.

In Hong Kong, the Hang Seng Index was up 0.06 per cent and China's blue chip CSI300 Index was 0.07 per cent higher.

Overnight, the Dow Jones Industrial Average rose 0.12 per cent and the S&P 500 was up 0.07 per cent, while the Nasdaq Composite was off 0.11 per cent.

The Fed's Powell is due to deliver his semi-annual testimony before Congress on Tuesday and Wednesday, which will be closely watched for clues regarding the extent and duration of the U.S. central bank's restrictive monetary policy aimed at curbing inflation.

Fed funds futures traders are pricing in a 76 per cent probability the Fed will raise rates by 25 basis points (bps) at its Mar 21 to 22 meeting, and a 24 per cent likelihood of a 50 bps increase.

In the US, the Labor Department's February employment report is expected on Friday and any signs of softening in the robust jobs market will be seen as a sign that the Fed's hawkish tactics are having their desired effect.

"In the next couple of days the congressional testimony will be critical for markets. Investors have repriced what they think the Fed will do with interest rates in March and into the second quarter," said Tai Hui, JPMorgan Asset Management's chief Asian market strategist.

February US non-farm payrolls will also be watched closely after a strong January number, Hui added, with markets being "seemingly directionless" awaiting the macroeconomic data and US policy comments.

Bank of America chief executive Brian Moynihan on Tuesday told a Sydney business summit that the bank predicted the USeconomy would reach a technical recession later this year before the central bank began cutting rates in 2024.

"It's a very slight recession in the scheme of things. I don't think you'll see a deep recession," he said.

"In our view that is based on a corporate side or a commercial side slowdown, not a consumer side slowdown."

In Asian trading, the dollar rose 0.13 per cent against the yen to 136.08, and remains weaker from its high this year of 137.09 reached last week.

The euro was up 0.1 per cent on the day at US$1.0683, having gained 1.01 per cent in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 104.25.

US benchmark West Texas Intermediate crude ticked up 0.28 per cent to US$80.69 a barrel. Brent crude was higher at US$86.49 per barrel.

Gold was slightly lower. Spot gold was traded at US$1846.43 per ounce.