HONG KONG – Most Asian investors tentatively stepped back into the markets today after the previous day’s Federal Reserve (Fed)-induced sell-off, while the US dollar held gains as focus turned to the release of key US jobs data.
Fed boss Jerome Powell’s pushback against expectations of a softer approach to monetary tightening sent shivers through trading floors and ramped up fears of a global recession.
The governor told a news conference that while the size of increases would likely come down, they would top out at a higher level than expected, dealing a blow to talk of an end soon.
The decision came as other central banks have signalled they will tone down their hawkishness, even in the face of decades- or record-high inflation.
The Bank of England became the latest yesterday when it lifted borrowing costs by their most in 33 years – and to a 14-year high – but said they would not go as high as markets had priced in.
It also warned that the UK economy faced a prolonged recession – possibly into 2024 – as it battles high prices caused by the Ukraine war.
The comments skewered the pound – already under severe pressure after recent turmoil in Westminster – and sent it tumbling against the US dollar and euro, while it struggled to bounce back in Asia.
Still, regional equity markets mostly turned positive as investors picked up bargains and awaited the non-farm payrolls data later in the day, which could provide fresh insight into the state of the world’s top economy.
With the Fed pointing to a still-strong labour market as a key reason for not shifting from its rate-hike strategy, traders are nervous that a big figure in the report will give officials room to tighten more.
“After initial jobless claims came in line with expectations, Friday’s payrolls will be the last vital data point this week, as signals on the labour market remain crucial to the Fed’s path forward, and many stock pickers are dearly hoping for ’bad news is good news’ close to the week,” said SPI Asset Management’s Stephen Innes.
In early trade, Hong Kong jumped nearly 4% on lingering hopes that China will soon begin rolling back its zero-Covid-19 strategy of lockdowns that has hammered the world’s second-largest economy.
While it retreated with others yesterday, the Hang Seng Index has surged since an unverified statement earlier this week suggested officials in Beijing were discussing a change. Shanghai was up more than 1%.
The gains continue despite pushback from authorities in China.
Elsewhere, Sydney, Seoul, Singapore and Wellington rose.
However, Tokyo was deep in the red as traders played catch-up with yesterday’s losses after returning from a one-day holiday. Taipei, Manila, and Jakarta also fell.
Key figures around 10.30am
Tokyo – Nikkei 225: DOWN 2.0% at 27,103.17 (break)
Hong Kong – Hang Seng Index: UP 3.9% at 15,936.89"
Shanghai – Composite: UP 1.5% at 3,041.59
Pound/dollar: UP at US$1.1202 from US$1.1160 yesterday
Euro/dollar: UP at US$0.9767 from US$0.9751
Dollar/yen: DOWN at ¥148.13 from ¥148.25
Euro/pound: DOWN at 87.21 pence from 87.73 pence
West Texas Intermediate: UP 0.5% at US$88.64 per barrel
Brent North Sea crude: UP 0.5% at US$95.15 per barrel
New York – Dow: DOWN 0.5% at 32,001.25 (close)
London – FTSE 100: UP 0.6% at 7,188.63 (close) – AFP, November 4, 2022
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