Asian stocks ease off 1-year high after Fed rate comments

Reuters: Asian shares pulled back from a one-year high and the dollar strengthened on Wednesday, after an influential Federal Reserve official said interest rates could rise as soon as September.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.3% while Japan’s Nikkei rose 0.5%, paring some of Tuesday’s sharp losses.

China’s CSI 300 index the Shanghai Composite both lost 0.6% after authorities approved the launch of a long-awaited scheme to allow stock trading between Shenzhen and Hong Kong and lifted quota limits for the existing Shanghai-Hong Kong Stock Connect.

Wall Street shares retreated from record highs, with the S&P 500 losing 0.55%.

Markets still only partly believe their comments, remembering that the Fed ended up keeping rates on hold in June even after Fed officials talked up the possibility of a rate hike in preceding weeks.

Yields on two-year notes briefly touched a near three-week high of 0.758%, but failed to reach the July peak of 0.778%, and were last at 0.750%.

Fed funds rate futures are pricing in a 50% chance of a rate rise by December, a small increase from earlier this week.

The comments pulled the dollar from seven-week lows hit just after the inflation data.