Asian Share Market | Shares extend global sell-off, dollar holds gains

Asian shares extended a global sell-off on Wednesday while the dollar held gains as market optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Fed minutes and jobs data. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1 per cent after a 1.0 per cent drop the previous day in a sluggish start of the new year. Japan markets remain shut for a holiday.

South Korean shares slid 1.8 per cent, Australia's resources-heavy stocks declined 1.1 per cent, while Hong Kong's Hang Seng index fell 1 per cent, driven by a 1.5 per cent plunge in technology shares.

"Risk assets struggled a tad yesterday, and that makes a degree of sense given the complicated back story, and the remarkable rally seen into year-end," said Padhraic Garvey, regional head of research, Americas, at ING.

"While a one-day move cannot be simply extrapolated, there are reasons to be a tad concerned on the risk front at this early phase of 2024. Geo-political concerns have not abated, and in fact if anything are elevating."

Indeed, tensions in the Middle East are ratcheting up. Israel on Tuesday killed Hamas deputy leader Saleh al-Arouri in Lebanon's capital Beirut, raising the potential risk of war in Gaza spreading well beyond the Palestinian enclave.

Denmark's Maersk and German rival Hapag-Lloyd said on Tuesday their container ships would continue to avoid the Red Sea route.

Overnight, Wall Street's euphoria about rate cuts prospects cooled a little as stocks retreated from record highs. The Nasdaq slid 1.6 per cent and the S&P 500 lost 0.6 per cent.

Apple fell nearly 3 per cent to a seven-week low after Barclays downgraded its shares on demand concerns. Tesla shares ended flat after delivering a record number of electric vehicles in the fourth quarter, but the company lost its spot as the top EV maker to China's BYD.

Stocks were also pressured by a climb in Treasury yields in the new year. The 10-year U.S. Treasury yield briefly popped above 4 per cent overnight, the first time in two weeks, but closed at 3.9406 per cent, up 8 basis points for the day.

Cash Treasuries were not traded in Asia due to the holiday in Japan. 10-year Treasury futures were mostly flat on Wednesday.

In the foreign exchange market, currencies mostly traded sideways in early Asia hours. The U.S. dollar , which climbed 0.8 per cent against its peers overnight to a two-week high, hovered at 102.15.

The euro was last at $1.0940, having fallen 0.9 per cent overnight, while the Japanese yen nursed losses at 142.12 per dollar after a 0.8 per cent decline.

Bitcoin rose 0.5 per cent to $45,205, not far from a 21-month top of $45,922 hit on Tuesday.

Oil prices were marginally higher after closing lower on Tuesday. U.S. crude futures drifted 0.1 per cent higher to $70.43 a barrel, after dropping more than 1 per cent on Tuesday, while Brent LCOc1 was flat at $75.86 a barrel.

Market focus is now on the Fed minutes for the December policy meeting due later in the day and a slew of data this week which could help justify its optimism of the aggressive policy easing that has been priced in. Futures have wagered on six rate cuts in 2024.

The ISM survey on U.S. manufacturing is also due later on Wednesday, as well as job openings data, before a private payrolls report and jobless claims results on Thursday. The closely watched U.S. nonfarm payrolls report is due on Friday.

Spot gold was 0.1 per cent higher at $2,060.18 an ounce.