SINGAPORE : Asian shares extended a global sell-off on Wednesday, while the dollar and Treasury yields jumped as traders pared back expectations for the pace and scale of rate cuts by the Federal Reserve this year.
The latest shift in rate expectations came after an upside surprise in U.S. inflation on Tuesday which showed the consumer price index (CPI) rising 3.1 per cent on an annual basis, above forecasts for a 2.9 per cent increase.
Futures now point to about 90 basis points of easing priced in for the Fed this year, compared to 110 bps prior to the data release and 160 bps at the end of last year.
That kept pressure on global stocks, which had rallied strongly towards the end of last year on aggressive bets for rate cuts by major central banks globally in 2024.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent and was headed for a fifth straight day of losses. S&P 500 futures edged 0.06 per cent higher, while Nasdaq futures gained 0.11 per cent. EUROSTOXX 50 futures lost 0.23 per cent.
“We’ll likely have to wait for the second half of the year for the Fed to start cutting, but the issue isn’t so much whether the bank will cut rates this year, as that is an almost certainty at this point, but how many rate cuts there will be.”
“If they do try intervention, I think it’ll be near… the (dollar/yen) high from October 2022 and the high we saw in mid-November,” said Tony Sycamore, a market analyst at IG, referring to intervention efforts from Japanese authorities to shore up the currency.
Japan’s top currency officials warned on Wednesday against what they described as rapid and speculative yen moves overnight.
Elsewhere, stocks in Hong Kong reversed early losses to trade higher after returning from the Lunar New Year holidays. The Hang Seng Index rose 0.9 per cent.
Mainland China’s financial markets remain closed for the week. Source: Reuters
