(Bloomberg) — Stocks in Asia declined Wednesday after solid economic readings and higher commodities prices spurred speculation that major central banks will keep interest rates higher for longer.
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Benchmarks in South Korea and Hong Kong led the region’s decline. Mainland Chinese shares resumed their slide after a report showing expansion in the Caixin purchasing managers’ indexes didn’t provide a fresh catalyst. Contracts on US equities edged lower after the S&P 500 fell 0.7% in Tuesday trading.
Global equities have struggled to build on the strong gains of the previous quarter, with benchmarks gauges from Tokyo to New York largely rangebound this week as investors recalibrate their outlook on interest rates.
“We expect the cautious risk environment to persist into this Friday’s US non-farm payroll data release as the ‘good news is bad news’ mantra continues to play out,” said Jun Rong Yeap, strategist at IG Asia Pte. “The data will play a key role in further moving the dial around market rate views.”
Pressure on equities followed better-than-estimated data on US job openings and factory goods orders that added to skepticism about the pace of Federal Reserve easing. Swap traders are currently projecting about 65 basis points of rate reductions this year — less than the 75 basis points signaled in the Fed’s latest “dot plot” forecasts.
Remarks from Fed Chair Jerome Powell later Wednesday may offer further clues. He will speak after two other Fed officials who vote on monetary policy decisions this year supported the view for cuts this year in Tuesday comments.
San Francisco Fed President Mary Daly and her Cleveland counterpart Loretta Mester said they still expect the central bank to lower rates three times in 2024 — though they’re in no rush to begin lowering borrowing costs.
“Our base case is that the Fed engineers a soft landing and starts to cut rates in the second half of the year,” said Gargi Chaudhuri at BlackRock. “The downside risks to economic growth have diminished, so the risk of only two Fed rate cuts now appears higher than the risk of four cuts.”
Treasuries were flat during Asian hours after further selling pushed yields higher on Tuesday, when the 10-year yield touched the highest level since November. The moves were reflected in Australian yields, which climbed Wednesday.
Intervention
An index of the dollar was little changed. The yen was also flat against the greenback at around 151 per dollar, remaining around the weakest level of the year — keeping alive the possibility of official intervention to the support the currency.
Tatsuo Yamasaki, Japan’s former vice finance minister for international affairs, said the government “can step in as soon as the yen falls beyond the current range,” in an interview Tuesday.
The yuan, meanwhile, traded close to the weak end of its onshore trading band, the latest sign that a recent slew of upbeat economic data hasn’t been enough to bolster the Chinese currency.
In commodities, oil steadied following a rally Tuesday after an industry report pointed to a drawdown in US crude inventories, ahead of an OPEC+ meeting at which the group is expected to affirm current supply cuts. Gold climbed to hold a rally over the past six sessions, while Bitcoin gained to over $66,000.
“Rising crude oil prices pose additional risk to the inflation outlook,” said Fawad Razaqzada at City Index and Forex.com. “Additionally, numerous jobs reports are expected throughout the week. Trading could be volatile.”
In other corporate news, shares in Taiwan Semiconductor Manufacturing Co. were lower as the company evacuated factory areas following Taiwan’s strongest earthquake in 25 years, casting uncertainty over production at the world’s largest maker of advanced chips.
Disney is said to have secured enough shareholder votes to fend off a challenge from Nelson Peltz’s Trian Fund Management LP, according to a Reuters report. Singapore Telecommunications Ltd. said there is no impending deal to sell its Australian phone carrier Optus.
Key events this week:
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Eurozone CPI, unemployment, Wednesday
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US ADP employment, ISM Services, Wednesday
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Fed Chair Jerome Powell speaks, Wednesday
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Fed’s Austan Goolsbee, Adriana Kugler and Michelle Bowman also speak, Wednesday
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Eurozone S&P Global Services PMI, PPI, Thursday
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US initial jobless claims, Challenger job cuts, Thursday
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Fed’s Loretta Mester, Alberto Musalem, Thomas Barkin, Patrick Harker, Austan Goolsbee speak, Thursday
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European Central Bank publishes account of March rate decision, Thursday
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Eurozone retail sales, Friday
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US unemployment, nonfarm payrolls, Friday
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Fed’s Michelle Bowman, Thomas Barkin and Lorie Logan speak, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 12:58 p.m. Tokyo time
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Nasdaq 100 futures were little changed
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Japan’s Topix was little changed
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Australia’s S&P/ASX 200 fell 1.2%
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Hong Kong’s Hang Seng fell 0.7%
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The Shanghai Composite fell 0.2%
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Euro Stoxx 50 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0777
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The Japanese yen was unchanged at 151.56 per dollar
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The offshore yuan was little changed at 7.2518 per dollar
Cryptocurrencies
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Bitcoin rose 0.7% to $66,186.29
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Ether rose 1.3% to $3,314.8
Bonds
Commodities
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West Texas Intermediate crude was little changed
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Spot gold rose 0.2% to $2,284.96 an ounce
This story was produced with the assistance of Bloomberg Automation.
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