Asian Stocks Waver as Traders Ponder Rate Cut Bets
Asian shares fall as dollar remains near three-week high
Asian shares fell on Thursday and the dollar was near a three-week high as traders dialed back bets of steep and early rate cuts this year, with the minutes of the Federal Reserve’s last meeting failing to provide clues to when U.S. cuts might start.
Uncertainties in China economy weigh on markets
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.26% and was headed for third straight day of losses in a sobering start to the year. China stocks remained under pressure, with uncertainties about a recovery in the world’s second-biggest economy keeping investors on the fence.
China services activity shows mixed signals
A private-sector survey showed on Thursday that China’s services activity expanded in December at the fastest pace in five months thanks to a solid rise in new business, in contrast to an official survey on Sunday that showed a sub-index of services activity shrank again at the end of 2023.
Fed minutes show growing sense that inflation is under control
Minutes of the Fed’s Dec. 12-13 meeting released on Wednesday showed a growing sense among policymakers that inflation was under control and rising concerns about the risks that “overly restrictive” monetary policy may pose to the economy.
Market expectations for rate cuts decrease
Markets are now pricing in a 70% chance of the Fed cutting rates in March compared to 90% a week earlier, according to CME FedWatch tool. Investors have also lowered their expectations for the year, with futures pricing showing less than 150 basis points (bps) of easing anticipated this year versus 160 bps last week.
Goldman Sachs analysts anticipate rate cut in March
Goldman Sachs analysts though still expect the first rate cut in March and five total cuts in the year, calling the comments in the minutes dovish.
Fed officials predict rate cuts but optimism remains in the market
Fed officials in December predicted 75 bps of rate cuts in 2024, driving money-market bets for around double that amount amid market optimism that spurred a year-end rally in stocks and bonds.
Anxiously awaited U.S. nonfarm payroll report to provide further clues
The spotlight will now be on the eagerly awaited U.S. nonfarm payrolls report scheduled for Friday to provide further clues on the labor market, which has shown signs of easing.
Treasury yields fluctuate and oil prices climb on supply disruption fears
Benchmark 10-year Treasury yields briefly climbed above 4% on Wednesday before heading lower and were last at 3.920% in Asian hours. In the currency market, the dollar’s strong start to the year remained unhindered. Against a basket of currencies, the dollar was up 0.088% at 102.49, just shy of the three-week high of 102.73 it touched on Wednesday. Oil prices climbed 3% on Wednesday following a disruption at Libya’s top oilfield that added to fears that mounting tensions in the Middle East could disrupt global oil supplies.
