Asian markets fall ahead of US inflation data and Fed minutes.

Asian shares fell on Wednesday ahead of important U.S. inflation data that would likely impact how soon the Federal Reserve will cease its rapid rate rises. Markets expect at least one more at next month’s policy meeting.

MSCI’s broadest Asia-Pacific share index outside Japan (.MIAPJ0000PUS) fell 0.17% in volatile trading, ending its three-day gain run.

Futures indicated a widely lower open in Europe, continuing the somber mood. Eurostoxx 50 futures fell 0.16%, DAX futures rose 0.01%, and FTSE futures fell 0.07%.

Following Friday’s employment data indicated a healthy U.S. labor market, investors are focused on the March inflation report later today.

A Reuters survey of experts predicts core inflation grew 0.4% monthly and 5.6% annually in March.

“The attention will turn from the fall in headline inflation to underlying inflation pressures and how persistent it could be,” said Shane Oliver, head of the investment strategy at AMP Capital in Sydney.

Oliver said a risk to markets is that the narrative shifts from inflation to recession, but markets aren’t worried about it yet since it has been talked about for so long.

According to the CME FedWatch tool, markets are pricing in a 66% likelihood of the Fed hiking rates by 25 basis points in May and stopping for following sessions.

On Tuesday, Philadelphia Federal Reserve Bank President Patrick Harker said the U.S. central bank might soon stop raising interest rates but wants to return inflation to 2%.

Last month, the Fed boosted interest rates by 0.25% to 4.75%–5.00%.

Harker remarked, “I’m for getting above 5 and sitting there.”

Investors will examine the Fed’s March meeting minutes later for hints on its monetary policy and the banking sector’s stress.

On Tuesday, the International Monetary Fund cut its 2023 global growth predictions, warning that financial system weaknesses might spark a new crisis and hurt the global economy.

Once Silicon Bank and Signature Bank failed, investors expected the Fed to decrease interest rates to ease market stress, but a sticky inflationary environment won’t allow it.

This week’s OPEC+ oil output reduction stoked inflation fears, and Saxo Markets strategists warned service costs must fall to calm markets.

“Not yet. Core inflation is likely to stay high as oil prices rise again and the labor market cools slowly “they added.

When global tensions rose, China’s Shanghai Composite Index (.SSEC) rose 0.4%, while Hong Kong’s Hang Seng Index (.HSI) fell 1.2%.

When Beijing staged military drills in reaction to Tsai’s meeting with U.S. House Speaker Kevin McCarthy in California, China accused her of dragging Taiwan into “stormy seas” on Wednesday.

Tsai said Taiwan’s international journey, which included meeting McCarthy in the U.S. and visiting Guatemala and Belize, underlined its commitment to freedom and democracy.

Australia’s S&P/ASX 200 index (.AXJO) increased 0.41%, while Japan’s Nikkei (.N225) jumped 0.6%.

The dollar index, which compares the U.S. dollar to six other currencies, fell 0.049%. The sterling rose 0.09% to $1.2435, while the euro rose 0.12% to $1.0923.

Dollar-yen fell 0.09% to 133.80. The IMF advised the Bank of Japan to loosen its bond yield curve management to avoid sudden policy shifts.

Brent increased 0.05% to $85.65, while U.S. crude rose 0.06% to $81.58.

Gold rose 0.8% to $2,018.25 an ounce. Gold futures rose 0.55% to $2,015.90.