Asian stocks reached their highest point in two months, while the dollar continued to strengthen against the yen and yuan. The Federal Reserve paused rate hikes but hinted at more in the future, highlighting the contrast with more dovish policies in Asia. The Fed kept its benchmark funds rate window at 5-5.25 percent, however, committee members surprised markets by projecting two more 25 basis point hikes this year. This led to higher short-term U.S. yields and eliminated bets on any cuts in 2023.
In contrast, the European Central Bank is expected to deliver its eighth consecutive rate hike, bringing borrowing costs to two-decade highs. The euro, which had reached a one-month high at $1.0865, traded at $1.0816 as investors awaited the decision. This contrasted with China, which cut another key policy rate on Thursday due to signs of a stumbling economy. Traders also anticipated that the Bank of Japan would maintain its ultra-easy monetary policy.
The yen fell to a six-month low of 141.43 per dollar, while the yuan reached a six-month trough of 7.1819. Stock indexes in Hong Kong and Shanghai rose by more than 1 percent on hopes of more stimulus. MSCI’s broadest index of Asia-Pacific shares outside Japan also rose 0.6 percent to a new two-month high, while Japan’s Nikkei extended its rally to new three-decade highs. European and FTSE futures fell by about 0.2 percent.
“The Fed is being pretty steadfast,” said Bart Wakabayashi, branch manager at State Street in Tokyo. The Fed is focused on inflation, the labor market, and wages, aiming for inflation at 2 percent. While other rates may be higher, they will do what is necessary to bring inflation down to 2 percent.
Treasury yields rose in response. Two-year yields rose to 4.7416 percent, while ten-year yields rose to 3.8291 percent. Expectations for a rate hike next month firmed slightly, and hopes for cuts were pushed deeper into 2024.
In China, economic data indicated a slowdown with disappointing industrial output, retail sales, property investment, and home sales figures. This led China to cut a key benchmark and medium-term loan rates, as investors anticipate more support from Beijing. There are hopes that this additional stimulus will help the Chinese market overcome a disappointing first half.
Other market reactions included support for the Australian dollar due to strong jobs data, while the New Zealand dollar faced a decline after data revealed a recession. The euro, which has been strengthening against the dollar, faces its next test at the European Central Bank meeting. The yen slipped as expectations rose that the Bank of Japan would make no policy adjustments. Oil and gold prices were affected by expectations of high U.S. interest rates.
In summary, Asian stocks rose to their highest point in two months, with the dollar strengthening against Asian currencies. The Federal Reserve paused rate hikes while projecting more in the future, contrasting with more dovish policies in Asia. China’s economy showed signs of a slowdown, leading to rate cuts and hopes for additional stimulus. Other currencies and commodities were also affected by market expectations.
Denial of responsibility! SamacharCentrl is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
