Asian markets brace for a choppy trading session after US stocks slump

After the US shares dropped due to strong services data, Asian stocks are poised to fall Tuesday.

Australian shares opened lower, while futures for Japan and Hong Kong slid after a third day of declines in the S&P 500, which dropped 1.8%.

Treasury yields climbed and the dollar halted a four-day rout as the economic outlook fueled speculation that the Federal ReserveFederal Reserve will keep its policy tight and it will not be able to tame stubborn inflation.

Australian bond yields went higher after the jump in their US counterparts and ahead of a decision by the central bank later Tuesday. The Reserve Bank of Australia is expected to raise its key rate by 25 basis points, half of the size of the move expected later this month from the Fed.

The Australian dollar lost ground against the dollar's strength in the dollar. The offshore yuan was below 7 to the US dollar.

The market indicated a peak over 5% in the middle of 2023 as there was an increase in expectations for where the Fed terminal rate will be. The current benchmark is in a range between 3.75% and 4%.

Michael Wilson, one of the most vocal skeptics of the US stock market, says investors are better off booking profits. The strategist and his colleagues wrote that we are now sellers.

The US producer price report will be one of the last pieces of data that Fed officials will see before their Dec. 13 -- 14 policy meeting, so traders are anxiously awaiting the US producer price report Friday. Pressures are slowly cooling, but remain very elevated, according to inflation numbers over the past month.

A majority of 291 respondents to the latest MLIV Pulse survey said leveraged loans would be the canary in the coal mine to indicate that corporate credit quality is getting worse.

The market bets that the Fed won't hike if US rates peak at or below 5%, which is when about 28% of the survey respondents expect defaults to jump. If rates peak above 5%, another 63% think defaults are surging.

Markets are moving in a lot of different ways.

The Japanese yen was little changed at 136.62 per dollar.

None of the 10 year Treasuries increased their yield by nine basis points to 3.57%.

The story was produced with the help of Bloomberg Automation.

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