Stocks sink, dollar climbs as risk of hawkish Powell looms

Tokyo, Aug. 25 (BNA): Asian stocks sold off and the dollar scaled an 11-week peak against major peers on Friday, as investors braced for the risk of a hawkish tilt from Federal Reserve Chair Jerome Powell at Jackson Hole.

U.S. yields stabilised below 14-year highs. Crude oil found its footing around one-month lows, but remained on course for a second weekly decline amid a firmer dollar and simmering China-centered worries about global growth.

Meanwhile, the People’s Bank of China set a much stronger-than-anticipated official mid-point for the yuan – something it has done every day this week – to keep a floor under its currency amid the strains from a robust dollar and a sputtering economy.

MSCI’s broadest index of Asia-Pacific shares sagged 1.2 per cent, but remained on track for a 0.5 per cent gain for the week, which would snap a three-week run of declines, reports Reuters.

Nerves ahead of Powell’s speech at the Fed’s annual retreat for global central bankers, including the Bank of Japan’s Kazuo Ueda and European Central Bank’s Christine Lagarde, encouraged traders to cash in on the tech-led rally after chip designer Nvidia’s extremely strong financial results following Wednesday’s closing bell.

The tech-centric Nasdaq slumped 2.2 per cent to lead losses of more than 1 per cent across Wall Street’s three major indexes, and futures indicated a flat start at the reopen.

Japan’s Nikkei tumbled 2 per cent, with Nvidia supplier Advantest the biggest drag, crashing almost 10 per cent. 

Hong Kong’s Hang Seng slid 1.1 per cent, with a tech subindex dropping 1.7 percent. Mainland blue chips drooped 0.4 per cent.

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The Fed has been raising rates since March 2022 in an effort to bring down inflation, and investors are looking for clarity on whether more rate increases are ahead and how long the Fed plans to hold rates high.

The U.S. dollar index – which measures the currency against a basket of six developed-market peers, including the euro and yen – pushed as high as 104.20 in Asia, a level last seen in early June. The euro sank to the lowest since mid-June at $1.07845.

Against Japan’s currency, the dollar edged back toward last week’s nine-month high of 146.545, last trading at 146.15.

Tokyo consumer price data on Friday, which front-runs nationwide figures, showed inflation remained well above the BOJ’s target, but slowed for a second straight month, implying less pressure on the BOJ to imminently tweak policy again.

In energy markets, crude prices eased further on Friday, staying on track for weekly declines of between 2-3 per cent. Brent crude fell 16 cents, or 0.2 per cent, to $83.20 a barrel, while U.S. West Texas Intermediate crude fell 18 cents, or 0.2 per cent, to $78.91 a barrel.


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