By Andrew Galbraith

SHANGHAI (Reuters – Asian stocks declined, U.S. bond yields rose, and the dollar soared to a nearly two-decade-high against the yen as investors fretted about whether there would be more rate hikes in advance of a critical meeting of European Central Bank.

The meeting will see the ECB end its Asset Purchase Programme. However, rate rises are expected to be announced to counter rising inflation.

“It’s classic pre-central-bank-meeting price action. Matt Simpson from City Index in Sydney said that speculation on any timeframe other than an hourly, or intraday, isn’t very sensible at the moment.

“It’s an exciting meeting, and it has been since Christine Lagarde (now Draghi) was at the helm. It is the best thing since then.

Inflation concerns in Europe are further heightened by data showing that, in spite of war in Ukraine, the economy in the euro area grew faster in the quarter to the end of the first quarter.

Investors are speculating on the pace and size of ECB tightening. They also await U.S. consumer prices data Friday, which the White House said would show that it expected to “elevated”. A Reuters poll shows that economists predict annual inflation at 8.3%.

Investors remain concerned that central banks tightening inflation control could lead to an economic slowdown, even though Asian share market shares have increased by around 8% since the two-year lows of last month.

MSCI’s widest index of Asia-Pacific shares outside Japan fell 0.39% in morning trading, following losses in U.S. stock markets in the preceding session.

Australian shares fell 1.19%, Seoul’s dropped 0.64%. However, Hong Kong saw a 0.2% gain and Chinese A-shares were flat.

Japan’s stock index was also unaffected.

Overnight the fell by 0.81%, lost 1.08% and dropped 0.73%.

Analysts at ING stated in a note that trading over the past two weeks has been limited and based on low volumes.

“Previous examples of low volume range trading have always been preceded by a sharp downshift,” they warned. They also noted that Friday’s U.S. data on prices and Friday’s ECB meeting could be “catalysts to a more bearish outlook.”

U.S. Treasuries also suffered from the wait for U.S. prices data, with yields rising following Wednesday’s weak 10-year note auction.

From a U.S. closing of 3.029% Wednesday, Thursday’s U.S. 10 year yield edged higher to 3.0548%. On Thursday, it climbed to 2.8027%.

In contrast to the yen’s 20-year low, 134.56, rising yields helped the dollar. Widening policy divergence has caused the Japanese currency to fall. The Bank of Japan is one of only a few global central banks that maintains a cautious stance. [FRX/]

The global index was slightly lower at 102.6. However, the euro was stable ahead of the ECB meeting in $1.0712.

Oil prices gained on optimism about strong U.S. consumption and recovery in China following the lifting of COVID-19 restrictions.

Last night, the global benchmark reached $123.83 per barrel. This was 0.2% more than yesterday. This was an increase of 0.1% on the previous day to $122.32.

Weaker was gold, which can be sensitive to rising rates but is considered an inflation-edge. 1.1% to %1,851.35 an ounce. [GOL/]