Asia equities fall on fear of hawkish central bank hikes By Reuters

© Reuters. FILE PHOTO: A man looks at a stock quotation board outside a brokerage in Tokyo, Japan, April 18, 2016. REUTERS/Toru Hanai

By Selena Li

HONG KONG (Reuters) – Asian share markets followed Wall Street into the red on Wednesday as surprising strength in global surveys of services stoked fears that central banks would have to lift interest rates yet further and keep them up for longer.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.97%, after Wall Street posted its worst performance of the year on Tuesday, with an unexpectedly strong reading of S&P Global (NYSE:)’s composite purchasing managers’ index (PMI) showing the U.S. economy was not cooling yet.

“The flow of economic data surprises has continued overnight and this time it was a uniformly stronger than expected performance of the services sector across major developed market economies,” National Australia Bank (OTC:) analysts wrote in a client note.

“It concerns the market that central banks will have to hike rates a lot more to curb inflation,” said Kerry Craig, JPMorgan (NYSE:) Asset Management’s global market strategist.

New Zealand’s central bank raised interest rates by 50 basis points to a more than 14-year high of 4.75% on Wednesday.

The central bank said it expected to keep tightening further to ensure inflation returned to its target range over the medium term.

The Bank of Japan said on Wednesday it would conduct emergency bond buying, in a move to contain elevated yields, as the 10-year JGBs touched 0.505% for a second straight session, breaching the BOJ’s 0.5% cap and reaching the highest level since Jan. 18.

share index fell 1.25% on Wednesday following a Tuesday PMI report showing the factory sector had contracted.

China’s benchmark shed 0.68% and Hong Kong’s dropped down 0.27%.

Australia’s lost 0.25% in early trading, falling for a second straight session and touching its lowest in more than a month on expectations of interest rate rises.

U.S. 10-year notes touched 3.966%, the highest since November, before easing to yield 3.9389% on Wednesday.

The fell 0.077%, but analyst expect interest rate rises to lift the dollar, hurting emerging market equities, which benefited from a falling dollar.

fell 0.5% to $75.98 per barrel and was at $82.68, down 0.45%.

added 0.1% to reach $1,836.18 an ounce.

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