(Bloomberg) — Asian stocks declined, shrugging off Wall Street’s gains, as the double-whammy of an upcoming US inflation report and the Federal Reserve decision kept traders on edge.

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Hong Kong’s equity benchmark fell more than 1%, with auto shares leading the decline ahead of Europe’s tariff decision. Shares also dropped in Japan and Australia. Contracts for US shares were little changed after the S&P 500 closed at a new high, buoyed by a rally in Apple Inc.

Treasuries steadied after climbing on a solid $39 billion sale, which reflected speculation that Wednesday’s inflation reading will help make the case for the Fed to cut rates this year. Demand in an auction of 10-year debt was strong, with the bid-to-cover ratio of 2.67 being the highest since February 2022. Australian bonds nudged higher on Wednesday.

“China markets are in need of a fresh catalyst after the impact on sentiment from the previous measures has worn off, and it’s looking increasingly difficult for China to announce policy easing with Fed rate cuts being delayed.” said Charu Chanana, a strategist at Saxo Capital Markets. “Despite the tech sector optimism sustaining, markets are turning slightly cautious ahead of the event risks from the US CPI and FOMC announcement today.”

In key Asian data, China’s consumer prices rose in May to hold above zero for a fourth month, while factory-gate prices remained stuck in deflation. Separately, the Biden administration is said to be considering further restrictions on China’s access to chip technology used for artificial intelligence.

US monetary policy continues to be the single most critical input for traders in Asia even with India’s post-election volatility, central banks in Japan and Taiwan gearing up for their own rate decisions and various Southeast Asian currencies testing key support levels.

A Bloomberg index of dollar strength held onto its four-day advance, approaching an year-to-date high.

The Fed is widely expected to hold borrowing costs at a two-decade high on Wednesday, but there’s less certainty on officials’ quarterly rate projections, known as the “dot plot.”

The projections “could potentially be a major market moving event especially if the dots only show one rate cut in 2024 instead of two which seems to be the street consensus view,” said Nomura strategist Chetan Seth.

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The new dot plot likely will indicate two 25-basis-point cuts this year, compared with three in the March version, according to Bloomberg Economics. The economists expect the May CPI print to give the Fed some additional reassurance that inflation is slowing.

“The Fed must gain conviction that inflation is firmly headed toward its target before it cuts. So it’s likely that more convincing evidence of disinflationary tendencies might be necessary,” said Naomi Fink, global strategist at Nikko Asset Management. “Our view as a firm is for the Fed to be able to implement one rate cut this year.”

In commodities, oil held a two-day gain after industry data pointed to shrinking US crude stockpiles ahead of a report from the IEA on the market outlook.

Key events this week:

• Germany CPI, Wednesday

• US CPI, Fed rate decision, Wednesday

• G-7 leaders summit, June 13-15

• Eurozone industrial production, Thursday

• US PPI, initial jobless claims, Thursday

• Tesla annual meeting, Thursday

• New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday

• Bank of Japan’s monetary policy decision, Friday

• Chicago Fed President Austan Goolsbee speaks, Friday

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 11:44 a.m. Tokyo time

• Nasdaq 100 futures rose 0.1%

• Japan’s Topix fell 0.9%

• Australia’s S&P/ASX 200 fell 0.5%

• Hong Kong’s Hang Seng fell 1.4%

• The Shanghai Composite fell 0.1%

• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.0741

• The Japanese yen was little changed at 157.16 per dollar

• The offshore yuan was little changed at 7.2683 per dollar

Cryptocurrencies

• Bitcoin rose 0.1% to $67,380.82

• Ether rose 0.2% to $3,494.44

Bonds

• The yield on 10-year Treasuries was little changed at 4.40%

• Japan’s 10-year yield declined 2.5 basis points to 0.995%

• Australia’s 10-year yield declined two basis points to 4.30%

Commodities

• West Texas Intermediate crude rose 0.5% to $78.26 a barrel

• Spot gold fell 0.2% to $2,312.41 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma.

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