Source: AFP
Asian markets fell further on Wednesday as hopes of an early rate cut by key central banks faded and data confirmed China’s economy last year grew at its slowest pace in more than three decades.
The euphoria ahead of 2023 has been erased by a series of data and comments from the Federal Reserve suggesting a first-quarter turnaround was unlikely as inflation remains stubbornly above target and labor markets remain resilient.
At the same time, rising tensions in the Middle East and Eastern Europe, and the long-running US-China dispute, continue to keep investors on alert, fearing that the fragile economic recovery could be overturned.
Fed Governor Christopher Waller, a well-known central bank dove, said on Tuesday that data suggested policymakers should be able to cut borrowing costs this year — with inflation targeting in sight — but they must they move steadily.
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US Fed ‘within striking distance’ of inflation target: official
“I am becoming more and more confident that we are within touching distance of achieving a sustainable level of two percent (personal consumption expenditure) inflation,” he said at a mock event hosted by the Brookings Institution, referring to the Fed’s favored gauge.
“As long as inflation doesn’t pick up and stay high, I think (the policy board) will be able to lower the target range for the federal funds rate this year.
“When the time is right to start lowering rates, I believe they can and should be lowered methodically and carefully.”
The comments came after minutes released earlier this month indicated policymakers were keen to keep interest rates at two-decade highs as they try to shore up their gains in the fight against inflation.
That was followed by jobs data that beat forecasts and a surprisingly higher consumer price index reading.
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Asian markets fell as traders worried about the prospect of a rate cut
“We take (Waller’s) comments that he doesn’t need to rush as an indication that he doesn’t expect to push for a cut in March,” said Krishna Guha, at Evercore ISI.
Waller was “consistent with our baseline of a first cut in May or June,” Guha added.
Expectations for a cut in March have fallen to around 65%, having hovered around 80% on Friday, according to Bloomberg News.
The prospect of interest rates remaining on hold weighed on stocks, with Wall Street’s three main indexes ending up in the red as traders there returned from a long weekend.
European markets were also lower after central banks were hit by hopes of a euro zone cut this week.
The sell-off continued in Asian trade, with Hong Kong once again the worst performer as tech giants posted heavy selling, while there were also big losses in Shanghai, Sydney, Seoul, Singapore, Mumbai, Bangkok, Taipei, Wellington, Jakarta and Manila.
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Asian shares mixed after US inflation data, oil flat
Tokyo fell for a second day in a row, having retreated on Tuesday after six days of gains that pushed the Nikkei to a 34-year high.
The negative mood was exacerbated by data showing China’s gross domestic product grew 5.2 percent last year, its worst performance since 1990, excluding years hit by the pandemic.
The reading underscored the impact of a crippling property crisis, sluggish consumption and global turmoil on the world’s number two economy, which has struggled to capitalize on the opening from long-standing zero-Covid measures lifted at the end of 2022.
While in line with forecasts and slightly above the government’s target, the data will do little to silence calls for Beijing to unveil a “bazooka” stimulus to kick-start growth and do more to tackle a crisis debt in the huge real estate sector.
But in a speech at the World Economic Forum in Davos on Tuesday, Premier Li Keqiang predicted the reading and pointed out that it was achieved without “huge incentives”.
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China’s economic growth in 2023 is expected to be the weakest in decades
“We did not pursue short-term growth by accumulating long-term risk,” he told the gathering.
“The headwinds facing China’s economy in 2023 have not abated and the geopolitical environment may become more contentious following the election results in Taiwan,” SPI Asset Management’s Stephen Innes warned, referring to the pro-sovereignty candidate’s victory. Lai Ching-te at the weekend. presidential vote.
Keys around 07:00 GMT
Tokyo – Nikkei 225: Down 0.4 percent at 35,477.75 (close)
Hong Kong – Hang Seng Index: Down 4.1 percent to 15,215.01
Shanghai Composite: DOWN 2.1 percent at 2,833.62 (close)
Dollar/yen: UP to 147.82 yen from 147.18 yen on Tuesday
EUR/USD: DOWN at $1.0864 from $1.0879
GBP/USD: DOWN to $1.2634 from $1.2635
Euro/pound: DOWN to 86.04 pence from 86.07 pence
West Texas Intermediate: DOWN 0.8% to $71.85 a barrel
North Sea Brent crude: DOWN 0.7% to $77.77 a barrel
New York – Dow: DOWN 0.6 percent at 37,361.12 (close)
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Oil rallies as US, UK hit Huthis, stocks mixed after US CPI
London – FTSE 100: Down 0.48 percent to 7,558.34 (close)
Source: AFP