Asian equities inched down on Wednesday while bonds under pressure as investors weighs in the biggest Federal Reserve interest rate hike since 2000.
Shares in Hong Kong and South Korea down moderately. The MSCI Index ex Japan inched down by 0.20%. Japan and China remains closed.
Treasuries fell with the U.S. 10-year yield just under 3%. Dollar held at near two-year highs.
The Fed is expected to raise rates by 50 basis points Wednesday and detail plans for the reduction of its balance sheet.
“There is a difficult set up in general for risk assets” as valuations remain stretched despite a drop in equities, Kathryn Koch, chief investment officer for public markets equity at Goldman Sachs & Co. LLC, said on Bloomberg Television as reported by Bloomberg.
She added that “some people think stagflation is a real risk.”
Markets priced in half-point Fed moves by swaps for June, July and September — the most aggressive trajectory in three decades. Any indications that a bigger, 75-basis-point increase is a possibility could add volatility to the markets.
The latest U.S. data showed record levels of job openings and workers quitting in March, pointing to the prospect of higher wages feeding into price pressures.
“The Fed remains very focused on bringing inflation down, however, any further hawkish pivots will likely be tempered to some extent by the desire to achieve a soft landing,” Blerina Uruci, U.S. economist at T. Rowe Price Group Inc., wrote in a note.
In commodities, the WTI is trading around $103 a barrel while Brent is trading around $105 a barrel.