SYDNEY – Asian share markets slipped on Tuesday.
MSCI's broadest index of Asia-Pacific shares outside Japan fell another 1.3 percent, having lost a fifth of its value last year.
Japanese share trading was shut for a holiday but Nikkei futures were trading lower at 25,655, compared with the last close for the cash index of 26,094.
S&P 500 futures down 0.4 percent and Nasdaq futures was 0.6 percent lower. EUROSTOXX 50 futures fell 1.4 percent and FTSE futures 0.8 percent.
Data on US payrolls this week are expected to show the labor market remains tight, while EU consumer prices could show some slowdown in inflation as energy prices ease.
"Energy base effects will bring about a sizeable reduction in inflation in the major economies in 2023 but stickiness in core components, much of this stemming from tight labor markets, will prevent an early dovish policy 'pivot' by central banks," analysts at NatWest Markets wrote in a note.
They expect interest rates to top out at 5 percent in the United States, 2.25 percent in the EU and 4.5 percent in Britain and to stay there for the entire year. Markets, on the other hand, are pricing in rate cuts for late 2023, with Fed fund futures implying a range of 4.25 to 4.5 percent by December.
Minutes of the Federal Reserve's December meeting due this week will likely show many members saw risks that interest rates would need to go higher for longer, but investors will be attuned to any talk of pausing, given how far rates have already risen.
While markets have for a while priced in an eventual US easing, they were badly wrong-footed by the Bank of Japan's shock upward shift in its ceiling for bond yields.
The BOJ is now considering raising its inflation forecasts in January to show price growth close to its 2 percent target in fiscal 2023 and 2024, according to the Nikkei.
Such a move at its next policy meeting on Jan 17-18 would only add to speculation of an end to ultra-loose policy, which has essentially acted as a floor for bond yields globally.
Japanese 10-year yields have steadied just short of the new 0.5 percent ceiling, but only because the BOJ stepped in last week with unlimited buying operations.
The policy shift boosted the yen across the board, with the dollar losing 5 percent in December and the euro 2.3 percent.
The trend continued on Tuesday as the dollar slid 0.5 percent to a six-month low of 130.04 yen, having breached major chart support at 130.40. The euro fell to its lowest in three months at 138.32 yen.
The euro was steady on the dollar at $1.0658, after meeting resistance around $1.0715, while the dollar index was holding at 103.760.
In commodity markets, gold was firm at $1,829 an ounce and just short of its recent six-month top of $1,832.99.
Worries about the state of global demand saw oil prices lower. Brent lost 74 cents to $85.17 a barrel, while US crude fell 62 cents to $79.64 per barrel.