Asian stocks slide on fading rate cut hopes
Asian stocks dropped on Monday as investors scaled back expectations for Federal Reserve rate cuts this year, with the focus shifting towards Wednesday’s policy decision and upcoming US inflation data, Reuters reported.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.33 per cent despite thin trading due to public holidays in Australia, China, Hong Kong, and Taiwan.
The pullback followed Friday’s strong US nonfarm payrolls report, which revealed a much higher-than-expected increase in jobs created and a reacceleration in wage growth, highlighting the strength of the US labour market.
Futures markets now price in roughly 36 basis points (bps) of cuts for the Fed this year, down from 50 bps last week. The odds of an easing cycle beginning in September have also lengthened.
US equity futures bucked the Asian trend, with S&P 500 and Nasdaq futures edging up 0.03 per cent each.
The dollar strengthened against most currencies, with the US dollar index rising to 105.29. US Treasury yields also climbed, reflecting revised expectations for higher US interest rates.
The two-year yield and benchmark 10-year yield each rose about two bps to 4.8931 per cent and 4.4512 per cent, respectively.
Japan’s Nikkei rose 0.9 per cent, helped by a weaker yen. The Bank of Japan (BOJ) also holds its policy meeting this week, and investors are looking for clues on how it plans to adjust its massive bond-buying program.
In Europe, political uncertainty gripped markets after French President Emmanuel Macron called snap legislative elections for later this month following his party’s defeat in the European Union vote.
This decision raised concerns over Europe’s future political direction and sent the euro tumbling to a one-month low of $1.0749.
Equity futures in Europe also fell, with EUROSTOXX 50 futures losing 0.42 per cent and French bond futures shedding 0.3 per cent.
Oil prices edged higher, with Brent crude futures gaining 0.26 per cent to $79.83 a barrel and US West Texas Intermediate crude futures ticking up 0.24 per cent to $75.71 per barrel. Spot gold rose marginally to $2,295.29 an ounce.
