Asian shares steady but Fed disappointment hits bonds

Sydney, Apr. 17 (BNA):  Asian shares steadied from a recent sell-off on Wednesday, although investors remain wary after the world’s most powerful central banker had a change in U.S. rate cuts this year, pushing Treasury yields to new five-month highs.

 

Europe is set for a subdued open, with EUROSTOXX 50 futures flat on the day. U.S. stock futures slipped 0.1% after Wall Street finished the day lower, Reuters reported.

 

The dollar’s surprising resilience this year is causing discomfort in Asia’s currency markets.

 

The beleaguered yen is plumbing fresh 34-year lows on an almost daily basis, the Chinese yuan is pinned near five-month troughs and Vietnam’s dong is at record lows.

 

The New Zealand dollar gained 0.4% to $0.5902 after first-quarter inflation data showed domestically driven price pressures were surprisingly strong, adding to signs that the last mile to get inflation back to target could be rough.

 

On Wednesday, MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 0.1%, after falling more than 4% in the past three sessions. Japan’s Nikkei (N225), however, dropped 0.8% to the lowest in two months.

 

Taiwanese shares (TWII) outperformed with a gain of 1.6%, as the chip-making giant Taiwan Semiconductor Manufacturing Co (2330.TW), rose 2% ahead of its earnings results.

 

Shanghai Composite index (SSEC) gained 1.2% after the securities regulator clarified the new listing rules to calm the recent market panic.

 

Markets have already slashed the amount of easing expected this year to fewer than two rate cuts, a sea change from about six cuts predicted at the beginning of the year.  The first rate cut is still expected in September, although the market’s confidence in that has declined.

 

Two-year Treasury yields retested 5% overnight and were last at 4.9855%, while 10-years held near a five-month high at 4.6655% on diminishing expectations of Federal Reserve policy easing this year.

 

In currencies, the dollar index (DXY), measuring the greenback against its major peers, was buoyant near a 5-1/2-month high at 106.39.  The beleaguered yen was last steady at 154.62 per dollar as the risk of government intervention loomed, although so far there has been no action from Tokyo apart from verbal warnings.

 

Asian bonds extended the sell-off in Treasuries. The 10-year Australian government bond yield rose 5 basis points to 4.371%, the highest this year.

 

In commodities, oil prices slipped on Wednesday.  Brent futures fell 0.5% to $89.53 a barrel, while U.S. crude dropped 0.7% to $84.81 a barrel.

 

Gold prices eased 0.2% to $2,376.79 per ounce, slipping away from a record high of $2,431.29.

 

 

 

FG