A shockingly big rate hike in Australia on Tuesday weighed on fragile Asian stocks and pushed the yen to a new 20-year low, increasing investor anxiety ahead of US inflation data and central bank meetings in Europe and the US. As it tries to contain growing inflation, the Reserve Bank of Australia boosted interest rates by the most in 22 years and hinted at further tightening to come, sending the Australian dollar momentarily higher.
As Hong Kong's market pared back some of Monday's gains, MSCI's broadest index of Asia-Pacific equities outside Japan lost 1.1 percent. The Nikkei in Japan gained 0.3 percent. The S&P 500 e-mini futures were down 0.58 percent, while the Euro Stoxx 50 futures were down 0.86 percent.
On Monday, British Prime Minister Boris Johnson survived a vote of no confidence in his Conservative Party, but gilts and Treasuries suffered losses from selling that began as rumours of an attempt to oust him gained traction in London and New York trade. Overnight, the 10-year Treasury yield increased 9.9 basis points (bps) to a high of 3.0640 percent on May 11. The action has pushed the currency higher and tempered initial euphoria about China's exit from the COVID-19 embargo.
The dollar rose 0.8 percent against the yen on Tuesday, reaching 132.955, its highest level since 2002, as the Bank of Japan continues to lag behind the rest of the globe in raising interest rates to combat inflation. On Monday, ten-year gilt yields climbed as much as 10.2 basis points to a seven-year high of 2.256 percent.
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