published Feb 27, 2018, 8:04:02 PM, by Adam Haigh
(Bloomberg) —

Stocks in Asia followed their U.S. counterparts lower after hawkish comments from Federal Reserve Chair Jerome Powell and weaker than expected economic data from China and Japan. The yen strengthened after the Bank of Japan reduced longer dated bond purchases.

The MSCI Asia Pacific Index dropped led by real estate, financials and materials stocks. Most national benchmarks declined with Chinese and Hong Kong shares underperforming as China’s official manufacturing gauge fell the most in five years in February. Data from Japan also added to the negative sentiment — factory output fell more than expected in January and retail sales declined last month from December. The dollar held gains and Australian bond yields climbed as 10-year Treasury yields steadied around the 2.90 percent level.

Powell opened the door to the Federal Reserve raising U.S. interest rates four times this year as he acknowledged stronger economic growth may prompt policy makers to rethink their plan for three hikes. He said he expects the next two years to be strong for the economy and that his personal outlook for growth has firmed since December.

Bond yields have soared in recent months amid speculation that U.S. monetary policy will be tightened at a faster pace than previously thought. For equity investors, that’s testing nerves — global stocks are poised for their worst month in two years — after years of loose global central bank policy helped push up valuations that look less appealing to some in an environment of higher rates.

“If they do go four times, we think it’s going to be for the right reasons — which is that growth is good, inflation is not out of control,” Jim McDonald, Northern Trust Corp.’s chief investment strategist, told Bloomberg TV from Chicago. “That will not be a bad environment for risk-taking.”

Elsewhere, crude oil extended a decline as the International Energy Agency warned about seemingly unstoppable U.S. shale production.

Here are some key events scheduled for this week:

In China, the Caixin manufacturing purchasing managers’ index on Thursday may show growth momentum slowed slightly in February, though the signal may be clouded by the holidays. The European Union will publish a draft Brexit treaty on Wednesday and U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union. Japan capital spending is out on Thursday.
These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index fell 0.5 percent as of 10:59 a.m. Tokyo time. Topix index fell 0.4 percent. Hong Kong’s Hang Seng Index fell 1 percent. Kospi index fell 0.3 percent. Australia’s S&P/ASX 200 Index declined 0.5 percent. Futures on the S&P 500 Index rose 0.05 percent.

Currencies

The Bloomberg Dollar Spot Index fell less than 0.1 percent. The Japanese yen rose 0.2 percent to 107.10 per dollar. The euro rose less than 0.05 percent to $1.2237.

Bonds

The yield on 10-year Treasuries rose one basis point to 2.90 percent. Japan’s 10-year yield rose less than one basis point to 0.05 percent.

Commodities

West Texas Intermediate crude fell 0.6 percent to $62.66 a barrel. Gold rose less than 0.05 percent to $1,318.51 an ounce. LME copper rose 0.1 percent to $7,027.50 per metric ton.