Asian shares stopped on Wednesday as surprisingly strong U.S. economic news clashed with global growth concerns, the yen touched a 15-year low against the euro, and Japan hinted at action to avert more losses.
U.S. statistics and ECB hawkishness hurt bonds as markets lowered the probability of more rate hikes.
That only heightened interest in a star-studded panel of central bankers later in the day in Portugal, including Federal Reserve Chair Jerome Powell, ECB chief Christine Lagarde, and Bank of Japan Governor Kazuo Ueda.
“The U.S. data signals continued resilience in interest rate-sensitive sectors, and the Fed is very clear that a period of sub-trend activity may be needed to bring inflation under control,” said ANZ analysts. “So far, that doesn’t seem to be happening.”
“For the ECB, senior officials signalled the need for ongoing tightening unless core inflation slows materially and a September rate hike is looking increasingly on the cards.”
MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 0.2% due to rate risk.
After Beijing fixed the currency lower than expected, Chinese blue chips (.CSI300) fell 0.6%, weakening the yuan.
A Wall Street Journal story that Washington was exploring further limits on AI chip shipments to China lowered sentiment.
Nvidia (NVDA.O) fell 3%, and Nasdaq futures fell 0.4% after the revelation.
Japan’s tech companies cheered, sending the Nikkei (.N225) up 1.5%. Chipmakers Tokyo Electron (8035.T) and Advantest (6857.T) led gains.
EURO STOXX 50 futures gained 0.3% and FTSE 0.2%.
On Tuesday, S&P 500 futures fell 0.2% after strong U.S. housing, durable goods, and consumer sentiment data.
“The data indicated a firmer pace of residential, inventory, and equipment investment in the second quarter,” noted Goldman Sachs analysts. “We boosted our Q2 GDP tracking estimate by 0.4pp to +2.2%.”
The market narrowed the probability of a July Federal Reserve rate hike due to resiliency, despite a decline in the recent manufacturing survey.
Short-term Treasury yields rose as futures implied a 77% chance of a raise to 5.25-5.5% and a little higher risk of 5.5-5.75%.
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