Singapore, Feb. 1 (BNA): Stock markets were steady in Asia on Wednesday, with signs of slowing US wages fueling hopes that the Federal Reserve may hint at an end to rate hikes at its meeting later in the day.
Wall Street indexes rebounded, as did bonds to a lesser extent, while the dollar gave up overnight gains when the Fed’s preferred wage measure, the US Employment Cost Index, rose 1% last quarter, its smallest increase in a year, according to Reuters. to Reuters. reports.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6% by mid-session, after falling 1.2% on Tuesday, while Japan’s Nikkei was flat.
The Fed will announce its interest rate decision at 1900 GMT, followed by a press conference with Chair Jerome Powell half an hour later.
Interest rate markets priced in a slowdown in the pace of rate hikes, with an expected 25 basis point increase expected on Wednesday bringing the target range for the federal funds rate to 4.5-4.75%.
Barring surprises, the focus will be on Powell’s tone. Investors will try to gauge whether and how hard it will pressure the market to price cut interest rates starting in the second half of this year.
“The market is expecting some pullback from Powell, although it’s hard to say how much is enough to convince the market,” said Brian Dangerfield, head of G10 currency strategy at NatWest Markets.
“Anything less than Powell going 10 for 10 hardcore may ultimately be seen as not being hard enough. Conversely, the market may take even the smallest pacifist concession and deal with it.”
FX trading has been on hold ahead of the Federal Reserve, Bank of England and European Central Bank meetings that follow on Thursday.
The dollar fell for the fourth consecutive month in January, losing 1.5% on the euro and 0.8% on the yen. And both pairs settled in Asia, where the euro recorded 1.0865 US dollars and the purchase of the dollar 130.14 yen.
The Australian dollar rose 3.5% during the month of January, and took a breather at $0.7072.
US Treasuries were firmer cautiously in Asia, where the benchmark 10-year yield fell 2 basis points to 3.5069%. S&P 500 futures fell 0.3%.
gains and the economy
Ahead of the Fed meeting, European inflation data is set to come with risks of an upside surprise after Spanish price hikes came in hotter than expected earlier in the week.
US manufacturing data is also due, amid more signs of cracks in the global economy.
A private survey on Wednesday showed that Japanese factory activity contracted for the third consecutive month in January. South Korea posted a record monthly trade deficit for the month of January due to a much worse-than-expected drop in exports.
Facebook Meta’s owner reports earnings later on Wednesday. Company executives struck a cautious tone on their earnings calls on Tuesday, as a slowdown looms.
Exxon posted a record adjusted profit of $59 billion, though shares of Caterpillar and McDonald’s fell as both companies warned that inflation was squeezing profit margins.
In commodities markets, optimism about demand supported oil prices and Brent crude futures rose 0.23% to $85.67 a barrel. Gold, which had rallied on dollar weakness during January, paused at $1,927 an ounce.
India’s Adani Group, meanwhile, remained under pressure, with shares of Adani Enterprises down 3% and below the bid price floor for a $2.5 billion share sale that ended Tuesday.
Dollar bond prices in Adani Group companies in Asia stabilized on Wednesday after last week’s collapse.