Asian Shares Stutter, Dollar Buoyant As Data Supports Hawkish Powell

Asian shares wobbled while the dollar was perched near a three-month top on Thursday after a spate of economic data overnight appeared to support Federal Reserve Chairman Jerome Powell's hawkish guidance on further interest rate increases.

In his second day on Capitol Hill, Powell stuck to his message of higher and potentially faster interest rate hikes, but emphasized that debate was still underway with a decision hinging on data to be issued before the U.S. central bank's policy meeting in two weeks.

With riskier assets still reeling from the heavy sell-off a day earlier, investors are focused on February jobs data due on Friday for confirmation that continued strong jobs growth supports bigger rate increases.

Forecasts are centred on a more modest increase of 205,000 after January's 517,000 jump led markets to reprice their monetary tightening expectations.

MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2% on Thursday, extending a drop of 1.4% the previous session. Japan's Nikkei, on the other hand, rose 0.6%.

Both China's bluechips and Hong Kong's Hang Seng Index skidded 0.2%. S&P 500 futures eased 0.1% and Nasdaq futures were off 0.3%

Inflation data out of China showed on Thursday that domestic demand still remained tepid.

In the United States, data released overnight painted a picture of a sturdy economy and did very little to assuage fears that the Fed will ease up on its relentless barrage of rate hikes.

Job openings remain elevated, private payrolls beat consensus estimates and demand for home loans increased despite the ongoing upward trajectory of mortgage rates.

"It's hard to see this as clarifying the employment picture ahead of tomorrow's payrolls release, which remains a lottery," said Robert Carnell, regional head of research, Asia Pacific at ING.

"Although essentially the same message, Powell's tone yesterday to Congress was regarded by many commentators as slightly softer, noting that data would be the final arbiter of the size of the next hike and that no decision on the size of the March hike had yet been made."

The major U.S. stock indexes oscillated between modest gains and losses throughout the day, with the Nasdaq joining the S&P 500 in positive territory at the closing bell and the Dow posting a modest loss.

Financial markets have priced in a 78.6% likelihood of a 50 basis point hike to the key interest rate at the conclusion of the Fed's March meeting, up from about 30% at the beginning of the week, according to CME's FedWatch tool.

The U.S. dollar index, measuring the greenback's value against a basket of major peers, hovered close to a three-month top at 105.6. It, however, lost 0.2% to the Japanese yen at 137.04 per dollar, as Japan's economy grew at a much slower pace than initially estimated in the fourth quarter.

The greenback was also buoyant against the Canadian currency at $1.3802 Canadian dollars, the highest level in four months, thanks to a dovish Bank of Canada.

The central bank on Wednesday left its key overnight interest rate on hold, becoming the first major central bank to suspend its monetary tightening campaign.

On Thursday, the two-year Treasury yields held close to its 15 year highs at 5.0553%, while the benchmark 10-year yields were steady at 3.9775%.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, was at a negative 108.2 basis points, the most inverted since 1981. Such an inversion is seen as a reliable recession indicator.

In the crypto world, Silvergate Capital Corp said on Wednesday it planned to wind down operations and voluntarily liquidate after it was hit with losses following the dramatic collapse of crypto exchange FTX, sending its shares down 35% in after-hours trade.

Oil prices were largely steady on Thursday. U.S. crude held at $76.66 a barrel. Brent crude was largely unchanged at $82.67 per barrel.

Gold was slightly higher. Spot gold was traded at $1814.79 per ounce.

(Editing by Shri Navaratnam)