Dec 17, 2022
Asian shares track Wall Street lower amid chorus of Federal Reserve speakers
Asian shares tracked Wall Street lower on Thursday, as a number of Federal Reserve speakers echoed Chair Jerome Powell in saying that interest rates are set to go higher, capping risk sentiment, while the dollar hovered near one-month highs. MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.3%.
China’s blue chips eased 0.1%, while Hong Kong’s Hang Seng Index was down 0.2%, weighed by a larger fall of 0.7% in tech stocks. On Wednesday, Alphabet Inc shares fell 7.7% after its new AI chatbot Bard delivered an incorrect answer in a promotional video, dragging the S&P 500 and Nasdaq lower by more than 1%.
On Wednesday, New York Fed President John Williams said moving to a federal funds rate of between 5.00% and 5.25% “seems a very reasonable view of what we’ll need to do this year in order to get the supply and demand imbalances down.”Governor Christopher Waller said the battle to reach the Fed’s 2% inflation target “might be a long fight”. But Governor Lisa Cook said the big job gains in January with moderating wage growth increased hopes of a “soft landing”.
U.S. Treasury Secretary Janet Yellen said that while inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy.The bond market rallied a little after being caught wrongfooted by the January blockbuster U.S. jobs report, forcing many to reposition for a higher peak in the Fed funds rate.
The two-year Treasury yield, which rises with traders’ expectations of higher Fed fund rates, eased 2 basis points to 4.4375% on Thursday, while the yield on benchmark 10-year Treasury notes slid 5 basis points to 3.6012%.Futures are pricing in the Fed’s target rate to peak at 5.132% in July, about 25 basis points higher than last week, and that by December it will have declined to 4.813%, a jump of about 40 basis points since a week ago.
In the currency markets, movements were rather muted. The dollar index held close to a 1-month high at 103.45 against major peers, after last week’s stunning jobs and services data.In the oil market, Brent crude futures eased 0.2% to $84.90 while U.S. West Texas Intermediate (WTI) crude also settled 0.1% lower at $78.36.Gold was slightly lower. Spot gold traded at $1,872.48 per ounce.
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