Title: Asian shares weaken as traders eye central banks' rate plans

Jul 19, 2022 02:41AM ET

By: AnalysisWatch

On Tuesday, Asian stocks fell after overnight declines on Wall Street and on renewed fears of a COVID-19 outbreak in China, and the dollar held below last week's high, but traders' main focus was on upcoming central bank meetings.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.64%, giving back some of the previous day's 1.8% gain and heading back toward last week's two-year low.

Shares of Asian technology companies such as Alibaba and Samsung contributed to the decline after U.S. equity markets closed lower overnight, impacted by reports that Apple plans to slow hiring and spending growth next year.

Chinese blue chips fell 1.11%, also giving back the previous day's gains, as mainland China reported 776 new cases of coronavirus, raising fears of renewed restrictions on activity to curb the outbreak.

The EUROSTOXX 50 was set to open 0.75 percent lower, while the FTSE was set to open 0.4 percent lower.

Japan’s Nikkei rose 0.75 percent after taking Monday off due to the rally.

But as markets were waiting for important macroeconomic news, the overall picture was unclear.

Markets are expecting a big 75-basis-point rate hike at next week's U.S. Federal Reserve meeting, moving away from the flirtation with the possibility of a huge 100-basis-point increase, though market prices still show a 30 percent chance, according to the CME's Fedwatch tool.

The retreat from expectations of 100 basis points late last week helped stocks rise in the U.S. on Friday and in Asia and Europe on Monday.

The European Central Bank and the Bank of Japan will meet on Thursday, with the ECB expected to start raising interest rates from their pandemic-era lows with a 25-basis-point increase, while little change is expected from the ultra-weak BOJ.

After reporting a 48% drop in quarterly profit, Goldman Sachs Group Inc. warned overnight that it may slow hiring and cut spending as the economic outlook worsens. But as that exceeded analysts' expectations, the company's stock rose 2.5%.