Asian stocks mixed, Dollar dips on inflation fears

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Asian stocks mixed, Dollar dips on inflation fears

SHANGHAI Reuters- Asian shares were mixed on Thursday, while the dollar fell as investors assessed that strong U.S. inflation data was not worrying enough to change the Federal Reserve's already hawkish rates outlook.

The Fed is going to raise rates as soon as March, as the consumer price index rose 7% in the 12 months through December, the biggest annual increase in nearly 40 years, and investors were reassured by the fact that the jump was not a surprise.

Markets in Asia, where inflation pressures have been more subdued in major economies, could offer attractive risk hedging opportunities, said Jim McCafferty, Nomura's joint head of APAC equity research.

After recording its biggest daily gain in a month on Wednesday, the broadest index of Asia-Pacific shares outside Japan was 0.1% higher. Japan's Nikkei fell by 0.87% after surging nearly 2% a day earlier.

The S&P 500 was up 0.28% and the Nasdaq Composite was up 0.23% in Asia, a result of the uneven performance in Asia. The Dow Jones Industrial Average was up 0.11%.

There are more steps to support slowing growth, but it is likely to avoid aggressive cuts to interest rates, policy insiders and economists, according to the People's Bank of China.

The comments highlight the divergence between the world's two largest economies in economic and policy terms.

Despite Wednesday's inflation data, the Fed fund futures are pricing in nearly four rate hikes this year, despite the longer-dated U.S. yields dipped. Some analysts say there is still room for a more aggressive rate hike schedule.

In a note, Jonathan Petersen, markets economist at Capital Economics, said that the Fed will continue to tighten policy into 2023 by more than investors currently anticipate, as the U.S. 10 year yield will reach 2.25% by the end of 2023, and 2.75% by the end of 2023.

The U.S. 10 year yield went up to 1.7499% on Thursday after dipping to close at 1.725% on Wednesday. The policy-sensitive 2 year yield was up to 0.9229% from Wednesday's close of 0.907%.

Wednesday's drop in Treasury yields hit the dollar, which fell below key support levels on Thursday. The dollar index was down 0.05% at 94.963 last year, while the dollar index moved up against the yen to 114.60.

The euro was slightly changed at $1.1443.

Oil prices went down on the back of a falling dollar and tighter supply, and investors bet that the spread of the Omicron novel coronaviruses variant will have a relatively limited economic impact, a day after hitting their highest in nearly two months. O R Global benchmark crude fell 0.07% to $84.61 per barrel and U.S. West Texas Intermediate crude fell to $82.58 per barrel.