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Asian stocks drop ahead of US data release and Fed release minutes

Asia Pacific stocks fell on Wednesday morning, as investors awaited minutes of the US Federal Reserve's latest meeting, along with other US data. Investors are also weighing the risk that central banks will tighten currencies to curb inflation.

Japan's Nikkei 225 was down 1.07% by 9:36 PM ET (2:36 AM GMT), with markets reopening after the holiday season. Data released earlier in the day showed a purchasing managers index (PMI) for November of 54.2. The data also includes the services PMI.

South Korea's KOSPI fell 0.37% and in Australia the ASX 200 inched down 0.09%.

Hong Kong's Hang Seng Index fell 0.20%.

China's Shanghai Composite fell 0.19% and Shenzhen Component inched 0.10%.

The yield on the 10-year US Treasury note is around 1.65%, as the prospect of the Fed speeding up its asset-cutting programs has dampened inflation expectations. However, inflation expectations are still high.

With the US bond and equity markets closed on Thursday for a holiday, data including Fed meeting minutes, GDP and initial jobless claims numbers will be released later in the week. day.

Regarding the Fed's minutes, the key detail investors should keep an eye on are "discussions around the criteria for narrowing asset purchases faster," said Commonwealth Bank of America strategist Carol Kong. Australia said in a note.

Inflation trends suggest the Fed needs to start tightening earlier than it currently signals, the note added.

The Reserve Bank of New Zealand (RBNZ) raised interest rates to 0.75% in its policy decision earlier in the day. The RBNZ's move, an attempt to limit inflationary pressures, was smaller than expected and the central bank expects a benchmark borrowing cost of 2% by the end of 2022.

Investors are now watching whether continued high inflation will prompt other key central banks, including the Fed, to raise interest rates faster than planned.

“For a long time, the extra liquidity didn't go into the economy, it went into the market more.” Miller Tabak+ chief market strategist Matt Maley told Bloomberg.

Bank of Korea will make its own policy decision on Thursday. Across the Atlantic, Bank of England Governor Andrew Bailey will speak at a Cambridge Union event on Thursday.

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