Sign up now for FREE unlimited access to Reuters.comSign up

https://tmsnrt.rs/2zpUAr4 Nikkei down 2.3%, S&P 500 futures steady Dollar slips 0.6% against yen on news of BoJ rate control US 2-year yields climb new 15-year high of 3.8040% The US yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian shares fell on Wednesday as U.S. data dashed hopes of an immediate peak in inflation, although the dollar halted its relentless run against the yen as Japan gave its strongest signal yet was unhappy with the currency’s sharp drop. Data on Tuesday showed the headline U.S. consumer price index rose 0.1 percent on a monthly basis, beating expectations for a 0.1 percent decline. In particular, core inflation, which strips out volatile food and energy prices, doubled to 0.6%. read more Wall Street posted its biggest drop in two years, the safe-haven dollar posted its biggest jump since early 2020 and two-year Treasury yields, which have been rising on traders’ expectations of higher Fed funds rates, jumped to highest level in the last 15 years. Sign up now for FREE unlimited access to Reuters.comSign up The fall in stocks is expected to hit European markets, with Euro Stoxx 50 futures across the region, German DAX futures and FTSE futures up more than 0.7%. In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 2.2 percent on Wednesday, retreating from a 2.4 percent dive in resource-heavy Australia ( .AXJO ), down 2.5 percent in Hong Kong’s Hang Seng Index (.HSI) and a 1.5% drop in Chinese bluechips (.CSI300). Japan’s Nikkei (.N225) fell 2.6%. After a big sell-off in stocks overnight, both S&P 500 futures and Nasdaq futures rose 0.2%. “The markets reacted violently to what I would consider a moderate loss in the US CPI,” said Scott Rundell, chief investment officer at Mutual Limited. “Futures have stabilized so we may see a dead cat bounce tonight.” Financial markets are now fully priced in a rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, with a 38% chance of an outsized, full percentage point increase in the Fed’s funds target rate, according to CME’s FedWatch tool. A day earlier, the possibility of a 100 bps increase was nil. “USD rates are now pricing in a Fed funds rate of 4.25% until the end of 2022 (75bps, 75bps, 25bps for the remaining three meetings). Decent chances of a 4.5% peak in early 2023 are also reflected” , said Eugene Leow, senior rate strategist at Deutsche Bank. “While resilient growth and slowing inflation can create a better risk-taking environment, the U.S. economy now looks very hot. With no clear signs of a labor market slowdown and inflation still problematic, a Fed easing looks likely to be delayed again. .” The US dollar’s strength had pushed the interest-sensitive Japanese yen near a 24-year low of 149.96 yen before giving up some of the gains on news that the Bank of Japan was conducting interest rate controls in apparent preparation for currency intervention. read more Yen market intervention is rare. The last time Japan intervened to prop up its currency was in 1998, when the Asian financial crisis triggered a sell-off of the yen and rapid capital outflows. Earlier in the day, Japanese Finance Minister Shunichi Suzuki said currency intervention was among the options the government would consider. read more The dollar was now trading at 143.7 yen, down 0.6% on the day. Many traders remained skeptical that intervention was imminent, but the jump in the yen showed rising nerves. The timing of the BOJ’s move also suggests that 145 per dollar will be an important level for markets and authorities. The two-year U.S. Treasury yield climbed to a fresh 15-year high of 3.8040% on Friday before easing to 3.7629%, and the curve’s gap with benchmark 10-year yields widened to about 34 basis points, compared with just 16 basis points the one week before. A yield curve inversion is usually viewed as a recession warning. The yield on the 10-year Treasury note remained flat at 3.4178%. Oil prices fell on Friday. U.S. crude was down 0.6% at $86.82 a barrel and Brent was down a similar margin at $92.65. Gold was slightly higher. Spot gold traded at $1,703.02 an ounce. Sign up now for FREE unlimited access to Reuters.comSign up Reported by Stella Qiu. Editing by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes Our Standards: The Thomson Reuters Trust Principles.