Sydney, Sept. 14 (BNA): Asian stocks fell, the dollar held steady and two-year Treasury yields hit a new 15-year high Wednesday, as the US inflation report dashed hopes of a peak in inflation, sending bets higher. . You should raise to a higher level for a longer period.
US Department of Labor data on Tuesday showed the core CPI rose 0.1% on the month, versus expectations for a 0.1% decline. In particular, core inflation, which excluded volatile food and energy prices, doubled to 0.6%.
Wall Street saw its biggest drop in two years, the safe-haven dollar posted its biggest jump since early 2020, and two-year Treasury yields, which soared as traders expected Fed funds rates to rise, jumped to a 15-year high. According to Reuters.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.1% on Wednesday, weighed down by a 2.7% drop in resource-rich Australia, a 2.4% fall in Hong Kong’s Hang Seng Index, and a 1% drop in Chinese companies.
Japan’s Nikkei index tumbled 2.3 percent.
After a massive sell-off in stocks overnight, S&P 500 and Nasdaq futures were up 0.3%. On Tuesday, the Dow Jones Industrial Average fell 3.94%, the S&P 500 lost 4.2%, and the Nasdaq Composite fell 5.16%.
“Markets have reacted violently to what I consider to be a modest failure in the US CPI,” said Scott Rundell, chief investment officer at Mutual Limited.
“Futures are stable, so we may see a dead cat bounce tonight.”
Financial markets are now fully pricing in a rate hike of at least 75 basis points at the conclusion of next week’s FOMC policy meeting, with a 38% probability of a large volume increase and a full percentage point of the Fed’s revised money target, according to CME’s FedWatch Tool. .
A day earlier, the probability of a 100 basis point rise was zero.
“US dollar rates are now priced at the fed funds rate at 4.25% by the end of 2022 (75 basis points, 75 basis points, 25 basis points for the remaining three meetings),” said Eugene Liu, chief executive officer, rate strategist at Deutsche Bank.
“While resilient growth and slowing inflation could lead to a better risk environment, the US economy is now looking very hot. With no visible signs of a slowing labor market and inflation still being an issue, it looks like a downward turn from the Fed will be delayed once again .”
In the currency markets, the US dollar held steady against a basket of major currencies at 109.8, after jumping 1.4% overnight on the back of a surprisingly strong US inflation report.
It hovered near a 24-year high against the rate-sensitive Japanese yen at 144.4 yen. The yen has been a victim of the pessimistic monetary stance from the Bank of Japan, in contrast to interest rate hikes elsewhere.
The two-year US Treasury yield surged to a new 15-year high of 3.8040% on Friday before easing back to 3.777%, gapping the curve with benchmark 10-year yields hovering around 34 basis points, compared to just 16 basis points a week earlier. .
A yield curve inversion is usually treated as a recession warning.
The yield on the 10-year Treasury rose to 3.4273% compared to its US close of 3.423% on Tuesday.
Oil prices regained some of their gains on Friday, after falling in the previous session. US crude closed up 0.3 percent to $87.57 a barrel, and Brent crude settled at $93.38, up 0.2 percent on the day.
Gold was a little higher. Spot gold was trading at $1701.7526 an ounce.
HF