Asian markets gain, investors anxious for US rate hike clues

Asian markets gain, investors anxious for US rate hike clues
Pedestrians wait to cross a road at a junction near a giant display of stock indexes in Shanghai, China on Aug 3, 2022. (File photo: Reuters/Aly Song)

HONG KONG: Asian share markets were broadly positive while the dollar was slightly weaker on Thursday (Aug 25), with investors nervously awaiting the US Federal Reserve’s annual Jackson Hole conference for clues on how sharp future interest rate hikes might be.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3 per cent, after US stocks ended the previous session with mild gains.

Australian shares climbed 0.7 per cent, while Japan’s Nikkei stock index rose 0.52 per cent and China’s CSI300 advanced 0.27 per cent.

The Federal Reserve’s annual monetary policy conference in Jackson Hole, Wyoming is due to start on Friday.

Investors now expect the Fed Funds rate to peak at 3.80 per cent in March 2023, up from 3.62 per cent a fortnight ago, said Tapas Strickland, NAB’s economics director.

“Market moves at least are consistent with the hawkish pushback seen by Fed officials over recent weeks”, he added.

Interest rate futures imply a 60 per cent chance of a 75 basis point Fed hike in September

In early Asian trade, the yield on benchmark 10-year Treasury notes rose to 3.2 per cent compared with its US close of 3.1 per cent on Wednesday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.40 per cent compared with a US close of 3.39 per cent.

The yields had also made gains overnight, though that did not stop US equity markets rising on Wednesday.

The Dow Jones Industrial Average closed up 0.18 per cent, the S&P 500 gained 0.29 per cent and the Nasdaq Composite advanced 0.41 per cent.

The dollar edged 0.01 per cent lower against the yen to 137.09 . It is still some distance from its high this year of 139.39 in mid-July.

The European single currency was flat during early Asian trade at $0.999, having lost 2.45 per cent in a month.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was slightly weaker in Asia at 108.51.

“Expectations of a hawkish message from FOMC Chair Powell at Jackson Hole will likely keep upward pressure on the US dollar in the run‑up to his speech on Friday”, Commonwealth Bank analysts wrote in a client note.

“However there is a risk that the speech is deemed not hawkish enough and that we see some retracement in the US dollar”.

US crude ticked up 0.38 per cent to US$95.25 a barrel. Brent crude climbed 0.5 per cent to US$101.22 per barrel.

Gold was slightly higher, with spot gold trading at US$1,752.96 per ounce.

“Gold edged higher as the market weighs the outlook for monetary policy ahead of the annual gather of central bankers at Jackson Hole. The weakening economic activity induced some haven buying in the precious metals, snapping six days of declines,” ANZ analysts wrote in a note to clients.

Source: Reuters/st