SINGAPORE, Jan 16: Asian shares hit a one-month low, U.S. stock futures fell and the dollar rose on Tuesday as hawkish remarks from central bankers tempered expectations for interest rate cuts and traders waited to hear from the Feds influential Christopher Waller.
MSCIs broadest index of Asia-Pacific shares outside Japan fell 1.4% to its lowest since mid-December.
The Hang Seng headed for its worst session of the year, dropping 2% to a 14-month trough. Japans Nikkei snapped a six-session winning streak and retreated from a 34-year high, closing 0.8% lower at 35,619.
U.S. markets were shut for a holiday on Monday, but S&P 500 futures were 0.5% lower in Asia trade on Tuesday and Nasdaq 100 futures dropped 0.6%. European futures fell 0.6% and FTSE futures fell 0.3%.
Fed funds futures also dropped notably for Asia hours - reflecting a slight cooling in interest rate cut expectations - and short-term Treasury yields rose.
Two-year yields were last up 7 basis points and tugged the dollar to one-month highs on the risk-sensitive Australian and New Zealand dollars.
On Monday, European bonds were sold after European Central Bank officials pushed back on market bets on rate cuts. [
Bundesbank President Joachim Nagel said it was too early to discuss cuts and Austrian central bank governor Robert Holzmann warned not to bank on a cut at all this year.
"The upshot ... was to see money markets scaling back the implied probability of a 25 bp ECB cut in March to 26% from 40%," said NAB currency strategist Ray Attrill.
Two-year German bunds rose more than 7 bps to 2.6% and 10-year bunds rose 5.4 bps to 2.2%, lending support to the euro, which climbed to a three-week high against the Swiss franc. —Reuters
