Bull statues are placed in front of screens showing the Hang Seng stock index and stock prices outside Exchange Square in Hong Kong, China, August 18, 2023. REUTERS/Tyrone Siu/File Photo Acquire LICENSE RIGHTS
SINGAPORE, Nov 22 (Reuters) – Asian shares fell from 2-1/2-month highs on Wednesday and the dollar found support as investors tempered some of their earlier enthusiasm over the prospect of an end to U.S. interest rate hikes.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) has gained more than 3% for a week and hit its highest level since September on Tuesday. However, it fell 0.2% in early trading on Wednesday. Japan’s Nikkei (.N225) rose 0.5%.
Overnight, the S&P 500 (.SPX) broke a five-day winning streak, falling 0.2%. Chipmaker Nvidia (NVDA.O) reported after-hours sales well above Wall Street expectations, but shares fell 1.7% as the company had a poor sales outlook for China.
Nasdaq futures (.IXIC) fell 0.2% and S&P 500 futures fell 0.1% to start the Asia day. As the week progresses, volumes are expected to decline due to the Thanksgiving holiday in the United States on Thursday.
“It appears that the short-cover rally that began after the November (Fed) meeting is fading, with buying and selling alternating,” Naka Matsuzawa, chief macro strategist at Nomura, said in a note to clients .
The Federal Reserve released the minutes of that meeting overnight, although traders said policymakers’ promise to “proceed cautiously” from here was not new information.
Ten-year Treasury yields were slightly lower at 4.40% in Asian trading. They are down about 50 basis points since the Fed kept interest rates steady earlier this month.
Rate futures markets see almost no chance of the Fed hiking again, pricing in rate cuts of about 90 basis points by 2024, with a 30% chance of them starting as early as March.
“Since the (Fed) believes a soft landing is in sight, it would be foolish to risk it by hiking further than necessary,” said Philip Marey, senior U.S. strategist at Rabobank.
“If we were to see stronger economic and inflation data before the December meeting, longer-term interest rates are likely to rise again, replacing a rate hike. We therefore do not expect any further increases.”
PROSPECTS FOR THE YEN
In foreign exchange markets, the dollar, which had slipped since last week’s benign U.S. inflation report, stabilized overnight, recovering from multi-month lows for several currencies.
In early trading on Wednesday, the exchange rate was broadly stable at $1.0921 per euro and 148.17 yen. The Australian dollar was held at $0.6557 after retreating from resistance at its 200-day moving average at $0.6588 on Tuesday.
“We expect gaps in bond yields to continue to provide tailwinds for the yen and renminbi as inflation in the U.S. continues to ease and investors anticipate further interest rate cuts from the Fed,” said Jonathan Petersen, senior economist at Capital Economics .
“On this front, the outlook for the yen looks particularly promising… The risks are that the (Bank of Japan) will once again be an outlier in monetary policy, but this time it will raise its key interest rate, while most other major central banks lower it.”
China’s yuan, which gained 2% last week and pushed Asian currencies higher against the dollar, stabilized at 7.1356 as trading opened onshore.
China’s major state banks have recently been buying the yuan to speed its recovery, two sources told Reuters on Tuesday.
In terms of data, Singapore’s economy grew faster than initially estimated in the third quarter, helped by a revival in tourism.
Later on Wednesday, Reserve Bank of Australia Governor Michele Bullock will speak and note that US jobless claims are due.
In commodities markets, Brent crude futures remained just above their 50-day moving average at $82.64 a barrel. Iron ore futures in Singapore rose more than 10% this month to remain at $131 a tonne.
Bitcoin fell to $36,163 as Binance boss Changpeng Zhao resigned and pleaded guilty to violating U.S. anti-money laundering laws as part of a $4.3 billion settlement to resolve a years-long investigation into the crypto exchange to have.
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