TOKYO, RAW – Asian share markets slipped on Monday with the Federal Reserve expected to confirm it will soon start draining the massive liquidity that has fuelled the huge gains in growth stocks in recent years.

Adding to the caution was concerns about a possible Russian attack on Ukraine with the US State Department pulling out family members of its embassy staff in Kyiv.

The New York Times reported US President Joe Biden was considering sending thousands of US troops to NATO allies in Europe along with warships and aircraft.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1 per cent and Japan’s Nikkei 1.0 per cent. However, Wall Street futures were trying to bounce after last week’s drubbing, with the S&P 500 futures up 0.4 per cent and Nasdaq futures 0.7 per cent.

Edgy markets are now even pricing in a small chance the Fed hikes rates this week, though the overwhelming expectation is for a first move to 0.25 per cent in March and three more to 1.0 per cent by year end.

“With inflation eye-wateringly high, the Fed is on course to steadily remove the ultra-accommodative monetary policy that has been a key prop to stock prices for over a decade now,” said Oliver Allen, a market economist at Capital Economics.

The prospect of higher borrowing costs and more attractive bond yields took a toll on tech stocks with their lofty valuations, leaving the Nasdaq down 12 per cent so far this year and the S&P 500 nearly eight per cent.

The rout was exacerbated by a slide in Netflix, which tumbled almost 22 per cent, shedding $US44 billion ($A61 billion) in market value.

Such was the scale of the losses that Treasuries actually rallied late last week on speculation the bonfire of market wealth might scare the Fed into being less hawkish, a variation of the old Greenspan put.

However, Allen noted that even with the recent drop the S&P 500 was still 40 per cent above where it ended 2019, and the Nasdaq 60 per cent.

“Investors may not be able to rely on a so-called ‘Fed put’ this time around, given that the central bank’s tightening cycle has not even begun, and that the strength of the US economy suggests that much tighter policy is warranted.”

Indeed, the first reading of US gross domestic product for the December quarter is due this week and forecast to show growth running at an annualised 5.4 per cent before Omicron put its foot on the brakes.

Earnings season is also well under way and companies reporting this week include IBM, Microsoft, Johnson & Johnson, Intel, Tesla, Apple and Caterpillar.

While Treasuries did bounce late last week, 10-year yields are still up 22 basis points on the month so far at 1.77 per cent and not far from levels last seen in early 2020.

That rise has generally supported the US dollar, which added 0.5 per cent on a basket of currencies last week and last stood at 85.647. The euro was stuck at $US1.1341 ($A1.5787), having failed to sustain a recent rally to near $US1.1500 ($A1.6008).

“The risk is the Fed’s statement portrays an urgency to act soon, likely in March, in the face of very high inflation,” said Joseph Capurso, CBA’s head of international economics.

“That could even encourage markets to price a risk of a 50 basis point rate hike in March and, under that scenario, we expect a knee-jerk reaction above its 4 January high of 96.46.”

The Japanese yen tends to benefit from safe haven flows as stocks crumble, keeping the dollar soft at 113.66 and uncomfortably close to last week’s low of 113.47.

Gold held up at $US1,833 ($A2,552) an ounce, having hit a six-week peak of $US1,842 ($A2,564) last week.

Oil prices were rising again having climbed for five weeks in a row to a seven-year peak on expectations demand will stay strong and supplies limited.

Brent added 74 cents to $US88.64 ($A123.39) a barrel, while US crude rose 70 cents to $US85.84 ($A119.49).