Asian markets experienced declines on Thursday as concerns over Federal Reserve rate cut prospects loomed, following positive US economic data.
Asian stocks showed varied performances, with markets in Japan, Australia, and South Korea down, while mainland China and Hong Kong saw slight gains, supported by new manufacturing data from China.
The Bank of Japan’s decision to keep interest rates unchanged affected the yen, which remained volatile, maintaining its position at roughly 153 to the US dollar.
Meanwhile, US futures declined amid post-market losses from tech giants Microsoft and Meta, whose quarterly earnings underperformed.
Rate cuts in question as robust US data reshapes expectations
Data showing strong US economic growth has added a layer of uncertainty regarding the Federal Reserve’s direction on rate cuts.
The US economy posted solid expansion in the third quarter, with gains driven by consumer spending and defense investments.
Additionally, core inflation stood at 2.2%, aligning with the Fed’s long-term goals and suggesting stability, which could slow the pace of any potential rate easing.
Amidst the economic strength, the dollar showed resilience, on track for its best monthly performance in two years.
A surge in implied volatility of the Bloomberg Dollar Spot Index suggests traders are preparing for larger fluctuations in major currency pairs, including the euro, yen, yuan, and Mexican peso.
Market volatility hits bonds and fuels rate cut doubts
Government bonds globally saw mixed results on Thursday.
US Treasury yields were down slightly, while Australian and New Zealand bond yields edged higher, reflecting a market on edge over policy uncertainties.
A key index tracking global bond performance reached its lowest point in nearly three months on Wednesday.
“Strong economic indicators are dampening the likelihood of a Fed rate cut,” said Daniel Yoo, head of global asset allocation at Yuanta Securities, noting that high inflation and economic growth could delay rate adjustments.
Yoo also highlighted the impact of the upcoming US presidential election on inflation, with potential policy shifts under Donald Trump or Kamala Harris.
Investor focus shifts to corporate earnings and commodity prices
Corporate earnings in Asia played a central role, with Samsung’s chip operations failing to meet profit expectations and BYD’s shares falling despite surpassing Tesla in quarterly revenue.
Investors focused more on BYD’s revenue per vehicle, which did not match forecasts.
In commodities, oil prices rose slightly, continuing an upward trend from the previous session.
Gold steadied at $2,787 per ounce after hitting a record high earlier, driven by demand amid market uncertainties and the upcoming US elections.
Key upcoming economic events
Market watchers are gearing up for a range of high-impact data releases this week:
- Eurozone CPI and unemployment figures on Thursday
- US personal income and inflation data on Thursday
- Amazon and Apple earnings reports on Thursday
- China’s Caixin manufacturing PMI on Friday
- US employment and ISM manufacturing data on Friday
Elsewhere, Taiwan temporarily halted stock trading on Thursday as Typhoon Tai-Kong approached the island, bringing safety precautions and causing temporary market disruption.
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