Source: AFP
Asian markets were mixed on Wednesday as traders struggled to weather another record day on Wall Street, with a focus on the Federal Reserve’s policy meeting.
Policymakers are widely expected to keep interest rates at a two-decade high, but the real source of interest is the “dot” of their projections for how many cuts they’ll see this year.
At the end of 2024, markets had pegged it as high as six, but a string of strong data — pointing in particular to steady inflation — forced investors to revise it down to three.
That’s in line with the Fed’s December forecast, but there are concerns that policymakers could be swayed to cut their outlook to just two — or 50 basis points.
Some market participants also worry that the first tapering — seen by many as June — could be delayed.
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The US Fed is expected to keep interest rates on hold and discuss the timing of cuts
“It would take only two participants to move their dots to move the median to 50 basis points of cuts for this year,” warned Citigroup’s Veronica Clark.
“We think the Fed is OK with where it is now. But it’s definitely the risk.”
But Wall Street investors remained upbeat, pushing all three major indexes higher on the back of a tech rally, with the S&P 500 hitting another record.
“Since the start of this year, expectations for central bank easing in 2024 have declined substantially,” JP Morgan economists wrote in a recent note to investors.
“But this has not disrupted the general trend towards an easing of global financial conditions.”
Asian dealers were a little less enthusiastic, with markets moving in the morning session.
Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei and Manila were slightly higher, but losses were recorded in Jakarta and Wellington.
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The US Fed kicks off its rate meeting with the timing of cuts up for debate
The yen fell further after the Bank of Japan suggested Tuesday’s interest rate hike — its first in 17 years — was unlikely to be followed soon.
The move marked the end of the BoJ’s ultra-loose monetary policy, which has been extreme as other central banks have raised interest rates to combat rising inflation.
Speculation that the Fed could revise down its rate cut forecasts also put pressure on the Japanese currency.
“Looking ahead, the Bank will likely keep its stance accommodative in the near term, unless it sees risks of significant upward pressure on core inflation,” said Duncan Wrigley and Kelvin Lam at Pantheon Macroeconomics.
Keys around 02:30 GMT
Hong Kong – Hang Seng Index: UP 0.2 percent at 16,569.60
Shanghai – Composite: UP 0.1 percent to 3,064.28
Tokyo – Nikkei 225: Closed due to holiday
Dollar/yen: UP to 151.17 yen from 150.88 yen on Tuesday
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Yen falls, Asian markets mixed as Japan raises interest rates
EUR/USD: DOWN at $1.0864 from $1.0867
GBP/USD: DOWN to $1.2717 from $1.2721
Euro/pound: UP to 85.44 pence from 85.40 pence
West Texas Intermediate: DOWN 0.3% to $82.46 a barrel
North Sea Brent crude: DOWN 0.3% at $87.14 a barrel
New York – Dow: UP 0.8 percent at 39,110.76 (close)
London – FTSE 100: UP 0.2 per cent at 7,738.30 (close)
Source: AFP