SINGAPORE, Nov 22 (Reuters) – Asian stocks backed away
from 2-1/2-month high on Wednesday and the dollar found support
as investors’ tempered some of their earlier enthusiasm about
the prospect of an end to U.S. rate hikes.
MSCI’s broadest index of Asia-Pacific shares outside Japan
has gained more than 3% since a week ago and hit
its highest since September on Tuesday. But it fell 0.2% in
early trade on Wednesday. Japan’s Nikkei rose 0.5%.
Overnight the S&P 500 snapped a five-session winning
streak and fell 0.2%. Chipmaker Nvidia reported revenue
well above Wall St expectations after market close, but shares
fell 1.7% due to the company’s downbeat China sales outlook.
Nasdaq futures were down 0.2% and S&P 500 futures
fell 0.1% early in the Asia day. Volumes are likely to be
lightened through the rest of the week by Thursday’s
Thanksgiving holiday in the United States.
“It appears that the short cover rally that began after the
November (Fed meeting) is winding down and that buying and
selling is beginning to alternate,” said Nomura’s chief macro
strategist Naka Matsuzawa in a note to clients.
The Federal Reserve released minutes from that meeting
overnight though traders judged that policymakers’ promise to
“proceed carefully” from here was not new information.
Ten-year Treasury yields were marginally lower
at 4.40% in Asia trade. They have fallen about 50 basis points
since the Fed held rates steady early in the month.
Interest rate futures markets see almost no chance the Fed
hikes again and price about 90 basis points of rate cuts through
2024, with a 30% chance they begin as soon as March.
“Since the (Fed) believes that a soft landing is in sight,
it would be foolish to risk it by hiking further than
necessary,” said Rabobank’s senior U.S. strategist Philip Marey.
“If we were to see stronger economic and inflation data
before the December meeting, longer-term rates are likely to
rebound and substitute for a rate hike. Therefore we do not
expect further hikes.”
PROSPECTS FOR THE YEN
In foreign exchange markets, the dollar, which has been
sliding since last week’s benign U.S. inflation report, steadied
overnight and lifted from multi-month lows on several peers.
It was broadly steady at $1.0921 to the euro and
148.17 yen in early trade on Wednesday. The Australian
dollar was held to $0.6557 after recoiling on Tuesday
from resistance at its 200-day moving average at $0.6588.
“We expect bond yield gaps to remain a tailwind for the yen
and renminbi as inflation in the U.S. continues to moderate and
investors discount more rate cuts from the Fed,” said Jonathan
Petersen, senior economist at Capital Economics.
“On this front, prospects for the yen look particularly
promising…risks are skewed towards the (Bank of Japan) again
being an outlier in monetary policy, but this time raising its
policy rate when most other major central banks are cutting.”
China’s yuan, which has gained 2% in the past week and led
Asian currencies higher against the dollar steadied at 7.1356 at
the open of onshore trade.
China’s major state-owned banks have been buying the yuan to
hasten its recovery lately, two sources told Reuters on Tuesday.
On the data front, bellwether Singapore’s economy grew
faster than initial estimates in the third quarter, helped by a
resurgence in tourism.
Later on Wednesday Reserve Bank of Australia Governor
Michele Bullock makes a speech and U.S. jobless claims are due.
In commodity markets Brent crude futures held just
above their 50-day moving average at $82.64 a barrel. Singapore
iron ore futures, up more than 10% for the month, held
at $131 a tonne.
Bitcoin wobbled lower to $36,163 as Binance chief
Changpeng Zhao stepped down and pleaded guilty to breaking U.S.
anti-money laundering laws as part of a $4.3 billion settlement
resolving a years-long probe into the crypto exchange.
(Editing by Sam Holmes)
