Asian shares slip as investors eye Fed policy
Asian stocks took a breather after a stellar run on Wednesday as investors awaited key US economic data and speeches from policymakers expected to influence the Federal Reserve’s interest rate decision.
The broad MSCI index of Asia-Pacific shares outside Japan fell 0.6 per cent, snapping a streak of eight consecutive gains for the S&P 500 which closed down 0.2 per cent overnight.
Hong Kong’s Hang Seng was the biggest loser in the region, slumping 1.4 per cent after news broke of top shareholder Walmart planning to sell its stake in e-commerce giant JD.com, which subsequently dropped 11 per cent.
Japan’s Nikkei opened one per cent lower as its recovery from early August’s crash stalled around the 38,000 resistance, further dampened by a strengthening yen.
“The sell-off itself has largely corrected, and the recession scare has given way to soft landing hopes again,” said Bank of Singapore analyst Moh Siong Sim. However, validation from upcoming data is needed before investors can fully relax.
Later today, revised US labour data is expected to show a significant downward revision, potentially bolstering the case for interest rate cuts. Purchasing managers’ index surveys from the US and globally are also due on Thursday.
The weakening dollar has propelled gold to record highs and pushed the yen to 145.48 against the greenback, representing a 1.6 per cent gain this week and a staggering 11 per cent rise since last month’s 38-year low.
The euro has also gained nearly three per cent this month, reaching $1.1130 in morning trade, its strongest level since early December.
Interest rate futures are currently pricing in a 25-basis point cut from the Fed next month, with a one-in-three chance of a more aggressive 50-basis point reduction. Markets anticipate nearly 200 basis points in cuts this year and next.
The softer dollar likely reflects growing expectations of imminent policy easing by the Fed, noted Rabobank strategist Jane Foley. This raises questions about whether hopes for rate cuts might be overdone, potentially leading to near-term dips in the euro-dollar exchange rate.
Federal Reserve Chair Jerome Powell is scheduled to speak at the Jackson Hole symposium in Wyoming on Friday.
Meanwhile, the Australian and New Zealand dollars held onto recent gains, with the Aussie trading at $0.6747 and the kiwi at $0.6157.
The cautious market sentiment supported bond markets, with the 10-year US Treasury yield dipping slightly to 3.81 per cent. Commodity prices remained stable, with Brent crude futures hovering around $77.17 a barrel.
In emerging markets, central bank meetings in Thailand and Indonesia are not expected to yield any immediate rate cuts as both countries wait for the Fed’s move.
Attribution: Reuters
Subediting: M. S. Salama
