SINGAPORE: Asian stocks slipped to three-week lows and Hong Kong's unloved Hang Seng index slumped to a one-year trough on Tuesday while bonds and the dollar steadied as investors tempered expectations for cuts to U.S. interest rates and waited on U.S. jobs data.
The Australian dollar fell 0.6% after the central bank left interest rates on hold, as expected, and emphasised that the future direction rates would depend on data.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 1% in late afternoon trade, with Hong Kong doing most of the dragging with a 1.6% fall.
The Hang Seng is down more than 17% for the year so far, while world stocks are up almost 15%, as investors have streamed out of Chinese assets while the economy stumbles.
Japan's Nikkei was 1.4% lower at three-week trough, mostly thanks to falling chipmaking stocks. S&P 500 futures fell 0.2% and European futures were flat.
Gold hung on above $2,000 after a wild session on Monday, when it hit a record high in Asia before recoiling sharply lower.
"The market has more or less priced the soft landing scenario (for the U.S. economy) to perfection," said Bank of Singapore strategist Moh Siong Sim. "Overnight there was a bit of a reality check -- maybe it was too ambitious."
Treasuries had come under a little pressure on Monday as traders calibrated pretty aggressive pricing for U.S. interest rate cuts. Two-year yields rose 9.1 basis points (bps) and were steady at 4.62% in Asia trade.
Having been encouraged by a benign inflation report three weeks ago, futures imply about 125 bps of cuts in 2024.
U.S. job openings data is due at 1530 GMT, and broader hiring figures, which had last month showed signs of a slowdown in the job market, will be published on Friday.
"While it's understandable the market has embraced the recent improvement in inflation and softer October labour market data, strong momentum in the economy remains," ANZ analysts said in a note to clients.
"We therefore expect that the (Fed), while encouraged by recent inflation improvements, will continue to adopt a hawkish policy stance."
In currency markets, the dollar, which suffered its sharpest monthly decline for a year in November, rose slightly overnight.
The euro sat at $1.0841 on Tuesday, just above support at its 200-day moving average.
Core inflation in Tokyo slowed in November, though the yen strengthened a little to 146.88 per dollar.
The Australian and New Zealand dollars retreated from multi-month highs on Monday.
They were last a little weaker, with the Aussie dropping to $0.6583, where it was testing support at its 200-day moving average.
The Reserve Bank of Australia left interest rates on hold and said, as it had a month ago, that future rate settings would depend on data.
"We suspect that markets were expecting a more hawkish statement given the unusually long time before the next RBA meeting on 6 February," said Lenny Jin, global FX strategist at HSBC.
"The RBA did not forcefully push against the ongoing trend of easing financial conditions that has occurred globally since November."
Falling coal and gas prices pushed Australia's current account into deficit in the September quarter, data on Tuesday showed.
In commodity trading, Brent crude futures traded broadly steady at $78.07 a barrel, having fallen overnight on doubts that producers will make further cuts to output.
Chicago wheat held near its highest level since late August after the U.S. Department of Agriculture confirmed the largest one-off private sale to China in years.
Dalian iron ore futures declined amid lingering fears of China's intervention, though analysts cautioned that the downward trend may be short-lived. - Reuters