KONTAN.CO.ID - SYDNEY. Asian stocks pulled back on Tuesday as weak trade data weighed on Chinese stocks while investors awaited Federal Reserve Chair Jerome Powell's testimony later in the day for clues on the central bank's next move on rates.

Data on Tuesday showed China's exports and imports both fell sharply in January-February, reflecting a slowdown in the global economy and weak domestic demand. That pushed Hong Kong's Hang Seng Index down 0.76% and China's blue chip CSI300 Index 1.2% lower, erasing earlier gains.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%, although the index is up 2.9% so far this month.

Beyond China, investor focus remains on the U.S. interest rate outlook and what Powell may say.

"U.S. rates are still the number one driver for the Asia region as far as absolute performance is concerned," Dan Fineman, Credit Suisse's co-head of APAC equities strategy told Reuters.

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"China with its two sessions is important but rates are going to matter more than what is happening on the ground here in Asia," he said referring to China's National People's Congress underway in Beijing.

Yields on benchmark 10-year Treasury notes reached 3.9578%, compared with its U.S. close of 3.983% on Monday.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 4.88% compared with a U.S. close of 4.894%.

With a focus on monetary policy, Australian shares ended 0.49% higher, reversing earlier losses after the central bank raised interest rates, as expected, but tempered its hawkish outlook, which investors took as a sign the end to the policy tightening cycle make be near. That pushed the Australian dollar to a more than two-month low of $0.6690.

Japan's Nikkei stock index rose 0.3%.

In early European trade, the pan-region Euro Stoxx 50 futures were up 0.12%, German DAX futures rose 0.11% at and FTSE futures were 0.23% higher.

U.S. stock futures, the S&P 500 e-minis, were up 0.19% at 4,060.

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Fed chair Powell is due to deliver his semi-annual testimony before Congress on Tuesday and Wednesday, which will be closely watched for clues regarding the extent and duration of the U.S. central bank's restrictive monetary policy aimed at curbing inflation.

Futures traders are pricing in a 76% probability the Fed will raise rates by 25 basis points at its March 21 to 22 meeting and a 24% likelihood of a 50 bp increase.

The U.S. February employment report is expected on Friday and any softening in the robust jobs market will be seen as a sign that the Fed's rate hikes are having their desired effect.

"In the next couple of days the congressional testimony will be critical for markets. Investors have repriced what they think the Fed will do with interest rates in March and into the second quarter," said Tai Hui, JPMorgan Asset Management's chief Asian market strategist.

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Bank of America chief executive Brian Moynihan on Tuesday told a Sydney business summit that the bank predicted the U.S economy would reach a technical recession later this year before the central bank begins cutting rates in 2024.

"It's a very slight recession in the scheme of things. I don't think you'll see a deep recession," he said.

"In our view that is based on a corporate side or a commercial side slowdown, not a consumer side slowdown."

In Asian trading, the dollar rose 0.05% against the yen to 135.99, weaker than its year-high of 137.10 reached last week.

The euro was up 0.1% on the day at $1.0684, having gained 1.02% in a month, while the dollar index, which tracks the greenback against a basket of major currencies, was down at 104.23.

U.S. benchmark West Texas Intermediate crude ticked up 0.27% to $80.68 a barrel. Brent crude was higher at $86.43 per barrel.

Gold was slightly higher. Spot gold was traded at $1848.56 per ounce.

Editor: Wahyu T.Rahmawati