Asian shares, dollar wobble on caution before central bank meetings

Singapore, April 20 (BNA): Asian stocks fell on Thursday, while the dollar clung to overnight gains in cautious trade, as US Federal Reserve policymakers reiterated their commitment to rein in inflation despite signs of mounting economic headwinds.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.16%, set for a third straight day of losses. Japan’s Nikkei rose 0.27%, while Australia’s S&P/ASX 200 rose 0.13%.

Futures indicated that Europe was set for a muted opening, with Eurostoxx 50 futures up 0.09%, German DAX futures down 0.02% and FTSE futures up 0.04%, Reuters reported.

E-mini futures for the S&P 500 index were down 0.18%, while Nasdaq futures were down 0.33%. Shares of Tesla Inc fell 6% in after-hours trading after the electric vehicle maker posted its lowest quarterly gross margin in two years.

Elon Musk has doubled down on a price war he launched at the end of last year, saying Tesla will prioritize sales growth over profit margins in a weak economy.

Traders are preparing for central bank meetings in the next few weeks, as easing concerns about the banking sector refocus on inflation and monetary policy.

Thomas Polawik, President of APAC Multi-Asset Solutions at T.

A Reuters poll of economists showed that the Fed is likely to offer a final increase of 25 basis points in May and then keep interest rates steady for the rest of the year. The CME FedWatch tool showed that markets are pricing in an 83% chance of a Fed hike of 25 basis points.

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The hawkish rhetoric from the Fed speakers continued with NY Fed President John Williams saying that the inflation rate remains at problematic levels and that the US central bank will work to bring it down.

More Fed speakers are scheduled to comment during the rest of the week, before officials enter a blackout period on April 22 ahead of the central bank meeting on May 2-3.

The Federal Reserve’s report on Wednesday showed that US economic activity has not changed much in recent weeks as employment growth moderated somewhat and price increases appeared to slow.

The central bank’s latest reading on the state of the economy provides a snapshot of business conditions, banks and workers in the wake of the failure of two major regional banks in mid-March, which shook confidence in the US financial sector.

Rob Carnell, an economist at ING Bank, said the report from the Fed was “absolutely disappointing news because it suggested the US economy was stalling” and could raise concerns about a recession.

“I think we could look at yields declining across the board and we could look at the dollar starting to weaken again.”

Benchmark 10-year yields fell to 3.591% in Asian hours after climbing to a four-week high of 3.639% on Wednesday.

The two-year US Treasury yield, which is usually in line with interest rate expectations, fell 2.3 basis points at 4.242%, after reaching 4.286% on Wednesday, the highest level since March 15.

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Chinese stocks fell on Thursday, as sentiment soured by new data this week that highlighted an uneven economic recovery after the country reopened this year. China’s CSI 300 Super Index fell 0.64%, while the Shanghai Composite fell 0.69%. Hong Kong’s Hang Seng Index rose 0.19%.

In the currency markets, the US dollar index lost 0.029%, and the euro rose 0.02% to $1.0956.

The yen declined by 0.05%, to 134.78 per dollar, while the pound sterling was last traded at 1.2432 dollars, down 0.05%.

Data on Wednesday showed that Britain has the highest inflation rate in Western Europe, boosting expectations that the Bank of England will raise interest rates at its meeting in May.

Elsewhere, the RBA will get a new specialized monetary policy management board which will be chaired by the governor but have independent expert members with more power over setting interest rates.

In the oil markets, US crude fell 0.99% to $78.38 a barrel, and Brent crude was $82.37, down 0.9% on the day.


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