AUSTRALIA. Sydney: In light of Wednesday’s cautious trade, Asian shares weren’t as stable. In the meantime, the dollar declined as investors prepared for the US Federal Reserve’s policy decision later in the day. People will keenly follow any indications of a slowdown in upcoming hikes.
Early trading saw a 0.2% decline in MSCI’s largest index of Asia-Pacific shares outside of Japan as a decline in Hong Kong and Chinese blue chips counterbalanced gains in South Korea and Australia.
Japan’s Nikkei (.N225) fell 0.1%.
At 2 p.m. EDT (1800 GMT) on Wednesday, the biggest central bank in the world is scheduled to announce its policy statement.
Fed to boost its benchmark overnight
Investors are set to closely examine the statement and any remarks made by Fed Chair Jerome Powell for any indication that policymakers are considering slowing the pace of hikes.
Market participants anticipate that the Fed will boost its benchmark overnight interest rate by 75 basis points (bps), for a total increase of four consecutive times, to a range of 3.75% to 4.00%.
As per CME’s Fed tool, futures markets are pricing in a 44.5% probability of a 50-bps increase, while traders are divided on the amount of the hike in December.
NatWest Markets’ chief U.S. economist, Kevin Cummins, said that “We suspect Chair Powell will try very hard to avoid saying anything that might be misconstrued as a signal that the inevitable step down in the size of tightening is a pivot toward the end of the tightening cycle.”
“Given that the inflation-related data has yet to show any signs of any moderation, we lean a bit more toward officials holding off from signalling they are reducing the size of hikes just yet,” he added.
Cummins anticipates that the Fed will reduce its rate hike in December to one of 50 basis points.
An overnight survey revealed that job opportunities in the United States surprisingly increased in September, indicating that the demand for labour is still high.
Treasury yields turned around as a result, and market bets on interest rates rising to exceed 5% in 2019 increased.
U.S. stocks ended the day lower, with the Nasdaq Composite (.IXIC) dropping 0.89%, the S&P 500 (.SPX) losing 0.41%, and the Dow Jones Industrial Average (.DJI) slipping 0.24%.
In the foreign exchange market, the dollar
dropped 0.6% to 147.32 yen versus the Japanese yen amid low liquidity, retreating from its most recent high of 148.84 yen hit two sessions earlier.
Compared to other currencies, it remains mostly stable.
The safe-haven greenback gave up some of its recent gains in October, hoping that the Federal Reserve would announce a halt to its aggressive tightening drive at its policy meeting in November.
Following a significant overnight loss, U.S. Treasury yields were largely stable on Wednesday due to the unexpectedly strong jobs data.
While the yield on two-year benchmark notes barely moved at 4.5364%, the yield on benchmark ten-year notes slipped 2 basis points to 4.0336%.
In terms of commodities, oil rose as market data revealed an unexpected decrease in U.S. crude stockpiles, indicating that demand is continuing to hold steady.
U.S. crude oil futures increased by 0.5 percent to $88.93 per barrel, while Brent crude futures increased by 0.4 percent to $94.98.
Gold’s current price increased marginally to trade at $1649.50 for an ounce.
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