Source: AFP
Asian markets continued their disappointing start to the year on Thursday, tracking another loss on Wall Street after minutes from the Federal Reserve’s December meeting dampened hopes for an early rate cut.
And oil prices built on the previous day’s rally after the deadly explosions in Iran which Tehran described as a “terrorist attack”, fueled geopolitical fears and heightened already high tensions in the Middle East.
The global rally that characterized the final months of 2023 has petered out at the start of the new year on concerns that the market may have gone a little too far ahead, prompting traders to take a breather.
Selling pressure intensified on Wednesday when Fed minutes showed that officials expect to keep interest rates high for some time as they look to ensure they have inflation under control.
That hit confidence in trading levels, where investors had bet on a cut as recently as March after the bank’s post-meeting statement last month showed it envisioned three cuts in 2024.
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“Participants saw the policy rate as likely to be at or near its peak for this tightening cycle,” the minutes said, adding that there was growing optimism among policymakers that there had been “clear progress” on inflation, which continues to it falls.
Officials wanted to begin the cuts this year, but gave no indication of when.
But Wednesday’s data provided fresh evidence that policymakers’ measures had begun but not enough to push the economy into recession, with jobs falling in December while the factory sector remained contracted.
The focus now turns to the release of key nonfarm payrolls data due on Friday.
“Overall, the labor market remains strong, but demand is cooling, coming into better balance with supply,” said Rubeela Farooqi at High Frequency Economics.
“These figures will be welcome news for policymakers and support the Fed’s view that the next rate move will be lower, likely in the second quarter.”
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And Laura Rosner-Warburton, of Macropolicy Perspectives, added: “What December taught us is that they are willing to pivot.”
Meanwhile, Richmond Fed boss Tom Barkin said the possibility of a so-called soft landing was “increasingly likely, but by no means inevitable.”
All three of Wall Street’s main indexes fell, with the Nasdaq down more than one percent as technology companies continued to retreat after a strong rally in recent weeks.
And Asia was no different, with Tokyo off more than one percent on Japan’s first day back from a long break. Also in the red were Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington and Taipei.
Oil prices rallied again, having piled more than 3 percent higher on Wednesday after two bomb blasts rocked a crowd honoring Revolutionary Guard general Qassem Soleimani, who was killed four years ago in a US strike in Iraq.
The blasts, which killed at least 95 people, came amid tensions already running high in the crude oil-rich region over Israel’s war on Gaza and the killing of the deputy leader of Hamas in Lebanon this week.
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They raised supply concerns after the shutdown of a Libyan oil field.
The attack has the potential to increase instability in the already volatile region, which has seen conflicts such as the Hamas-Israel war, Houthi militia attacks on merchant ships in the Red Sea and ongoing violence in Iraq, Syria and it. week, in Beirut,” said Stephen Innes of SPI Asset Management.
“However, unless a major supply disruption occurs in the Middle East, poor macroeconomic data could act as the ultimate rally.”
Keys around 02:30 GMT
Tokyo – Nikkei 225: Down 1.2 percent at 33,048.58 (break)
Hong Kong – Hang Seng Index: DOWN 0.5 percent at 16,572.05
Shanghai Composite: DOWN 0.6 percent at 2,950.21
West Texas Intermediate: UP 0.5% to $73.06 a barrel
North Sea Brent crude: UP 0.4 percent at $78.53 a barrel
Dollar/yen: UP to 143.42 yen from 143.24 yen on Wednesday
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EUR/USD: DOWN to $1.0917 from $1.0925
GBP/USD: DOWN to $1.2658 from $1.2668
Euro/pound: UP to 86.25 pence from 86.22 pence
New York – Dow: DOWN 0.8 percent at 37,430.19 (close)
London – FTSE 100: Down 0.5% to 7,682.33 (close)
Source: AFP