Tuesday saw a difficult recovery in Asian markets as investors remained cautious due to slightly warmer-than-anticipated inflation in Japan before this week's release of pricing data in the US and Europe.
As the Japanese central bank maintained its target of 2% annual inflation, the yen held steady at 150.57 against the dollar and slightly recovered from a three-month low against the euro. This kept alive hopes that the bank would end negative rates by April.
The Nikkei in Tokyo increased by 0.4% to reach a new all-time high. The largest MSCI Asia-Pacific stock index outside of Japan remained unchanged from the previous week's seven-month high.
This Thursday's release of the core personal consumption expenditures price index, the Fed's preferred inflation gauge, is expected to show a 0.4% increase.
According to ANZ Bank analysts, if the core m/m number comes in as predicted, it will be the highest since February of last year and would be consistent with the Fed's patience message.
Yields steadied during the Asia morning, but Treasuries were under pressure due to rate jitters and massive auctions, including $127 billion on Tuesday and $42 billion more on Wednesday.
The yield on US Treasury ten-year notes was last two basis points lower, at 4.27%. The yield on two years dropped four basis points to 4.70%.
The first Fed easing's potential timing, which is now priced at roughly a 70% possibility to be from May to June, has already been pushed out by the market. Futures suggest a little over a three-quarter-point reduction this year, as opposed to five at the beginning of this month.
In terms of geopolitics, US President Joe Biden stated that he hoped to see an Israel-Hamas ceasefire in Gaza begin by Monday of next week, as the parties involved seemed to be getting closer to reaching an agreement.
Brent crude futures remained in recent ranges, up 0.2%, or 16 cents, to $82.69 per barrel.
This week's EMU inflation figures are also scheduled for release on Friday. The core gauge seems likely to continue declining, reaching 2.9%, the lowest level since early 2022, and bringing nearer the date on which the European Central Bank may ease policy.
Markets are nearly completely priced for a first cut in June, with a 36% possibility in April. Governor of the Bank of Greece Yannis Stournaras and President of the European Central Bank Christine Lagarde both reiterated their caution about making drastic cuts in their speeches on Monday.
Later on Tuesday, Dave Ramsden, the deputy governor of the Bank of England, and Erik Thedeen, the governor of Riksbank, will make appearances, while some second-tier European and US data, such as consumer confidence for Germany, France, and the US, are also scheduled to be released.
Currency trade remained rather muted in the early Asian hours. The Australian dollar dropped 0.1%, reaching a one-week low of $0.6530, which was impacted by a decline in the prices of iron ore.
The kiwi fell 0.3% and hit a weekly low as investors reduced bets that the central bank of New Zealand may raise interest rates when meeting on Wednesday.
While sterling slowly declined to $1.2676, the euro remained stable at $1.0848. Bitcoin saw a strong overnight increase in value following the news that software company MicroStrategy had increased its holdings. Gold was steady at $2,032 per ounce.