Asian stocks swing lower with Fed’s rate in focus: markets wrap
Asian stocks extended declines as traders assessed the prospects of another rate hike by the Federal Reserve in May and a report that SoftBank Group was selling a stake in Alibaba Group Holding.
MSCI Inc’s Asia Pacific Index dropped 0.4%, with tech stocks in Hong Kong leading regional losses. Shares of Alibaba sank as much as 5.2% in Hong Kong following the report about the planned sale by SoftBank. Shares of embattled property developer Sunac China slid by a record when its stock trading resumed after a yearlong halt.
In Australia, stocks added to declines after the country reported a jobs number that beat estimates, fueling bets on more rate hikes. US futures fluctuated after both the S&P 500 and tech-heavy Nasdaq 100 closed on Wednesday near session lows.
The US dollar weakened against its major peers, while the yen edged higher after North Korea launched a missile toward waters off Japan’s east coast, prompting a warning for residents to take shelter.
Swaps markets showed the odds are still in favour of a quarter-point Fed hike in May, while traders maintained their expectations the US central bank will cut rates later this year. Treasury yields stayed in a narrow range, with the two-year slightly below 4%.
US stocks rallied at the start of Wednesday’s trading after data showed headline US consumer prices rose less than economists forecast, while the closely watched core CPI number increased 0.4%, meeting estimates and down from the prior month’s 0.5% gain. But the equity rally wavered, with risk sentiment deteriorating as traders assessed the outlook for inflation, higher rates and economic growth.
The moderation in inflation isn’t fast enough for the markets to see the Fed reacting by cutting rates starting in the summer, said Anna Rathbun, chief investment officer at CBIZ Investment Advisory Services. “We do believe that the Fed is going to stick to its hawkish higher-for-longer mantra,” she said on Bloomberg Television.
On the economic front in Asia, Australian employers added 53,000 jobs in March from the prior month, according to the Bureau of Statistics.
Chinese trade data are due on Thursday. The trade figures for March may show weaker external demand taking a heavier toll on exports, Bloomberg Intelligence said in a note.
Minutes of the Fed’s March meeting published on Wednesday showed policymakers scaled back expectations for rate hikes this year after a series of bank collapses roiled markets, and stressed they would remain vigilant for the potential of a credit crunch to further slow the economy.
Fed speakers sent mixed messages on the inflation battle on Wednesday. San Francisco Fed president Mary Daly said more rate hikes may not be needed, while Richmond Fed’s Thomas Barkin said “we still have a ways to go”.
Elsewhere, oil was slightly lower and gold rose. BM/DM