Asian Equities Drop as Fed Rate Hike Bets Rise and Oil Prices Rebound

Asia shares, oil slip as markets reprice Fed expectations

Market Movements and Economic Factors

By Gregor Stuart Hunter

SINGAPORE, June 23 (Reuters) – Asian equities and oil prices slid on Tuesday after the United States waived sanctions on Iran, while investors adjusted to heightened expectations that the Federal Reserve will pursue a more aggressive stance on inflation later this year.

Stock and Oil Market Performance

MSCI’s broad gauge of Asia‑Pacific equities outside Japan fell 2.9%, and S&P 500 e‑mini futures edged down 0.9%. Brent crude declined 1.22% to $76.95 a barrel.

Japan’s Nikkei 225 dropped 3.0%, and South Korea’s Kospi plunged 8.1%.

Investor Sentiment and Sector Rotation

“These are far from dull markets,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “The former generals of the market appear to have lost momentum, and investors are rotating into other areas of the market that are more defensive, less AI‑focused and offer more predictable cash flows.”

European and U.S. Market Reactions

In early European trading, the pan‑region Euro Stoxx 50 futures were down 0.96%, while German DAX futures fell 1.0% and FTSE futures slipped 0.95%.

U.S. stocks moved lower overnight, with the S&P 500 retreating 0.4% and the Nasdaq Composite losing 1.3%, weighed by declines in mega‑cap technology names such as Alphabet and SpaceX.

Oil Price Developments

Oil settled more than 3% lower as supply concerns eased following comments from U.S. Vice President JD Vance that progress had been made in talks with Iran and that the Strait of Hormuz remained open.

Currency and Bond Markets

Yen and Other Major Currencies

Yen Near 40‑Year Low

In currency markets, the yen held steady at 161.665 against the dollar, hovering near its weakest level in four decades after a volatile U.S. session.

Japan’s Finance Minister Satsuki Katayama said she had an online meeting with U.S. Treasury Secretary Scott Bessent the previous day to discuss global financial markets amid growing concerns over sharp currency swings.

British sterling fell 0.1% to $1.3234 after Prime Minister Keir Starmer announced his resignation, clearing the way for an expected handover to frontrunner Andy Burnham.

The U.S. dollar index, which tracks the greenback versus six major currencies, rose 0.07% to 101.08, approaching its highest level since May 2025.

Federal Reserve Expectations and Bond Yields

Traders are pricing in an accelerated schedule of rate hikes by a more hawkish Fed under new Chair Kevin Warsh.

Fed funds futures show a 54% implied probability of at least two 25‑basis‑point hikes before year‑end, up from 15.2% a week earlier, according to CME Group’s FedWatch tool.

Yields on the U.S. 10‑year Treasury fell 0.61 basis points to 4.501%.

Commodities and Cryptocurrencies

Gold and Digital Assets

Gold lost 1.75% to $4,118.55 an ounce. Bitcoin declined 1.56% to $63,368.73, while ether fell 1.17% to $1,712.74.

(Reporting by Gregor Stuart Hunter in Singapore; Additional reporting by Rocky Swift in Tokyo; Editing by Jacqueline Wong and Jamie Freed)

Source link