Traders are coming to terms with the possibility that US interest rates will be hiked again before the end of the year – Copyright AFP/File MOHD RASFAN
Asian markets were mixed Monday as investors contemplated the possibility the Federal Reserve will hike interest rates again and keep them at three-decade highs as officials struggle to contain inflation.
Equities have come under pressure in recent weeks on bets that the US central bank will need to stick with its tightening bias well into next year as prices remain well above target, while the economy and labour market remain in rude health.
Comments from monetary policymakers will be pored over in the coming days, with traders hoping for some insight into their thinking as speculation grows that borrowing costs will be lifted again before the end of the year.
Last week, Boston Fed chief Susan Collins warned another increase “is certainly not off the table”, while Governor Michelle Bowman suggested more would likely be needed.
The prospect of higher rates — and fewer cuts than hoped next year — dented sentiment on trading floors, and dragged all three main indexes into the red Friday.
And Asia struggled in early exchanges Monday, with Hong Kong off more than one percent while Shanghai, Sydney, Seoul, Wellington, Singapore and Jakarta were also lower.
Still, Tokyo, Taipei and Manila ticked higher.
“Sentiment still remains fragile with higher-for-longer messages reverberating through the markets,” said Redmond Wong at Saxo Capital Markets.
He added that buying could also be subdued by the possibility of a US government shutdown and the ongoing strike by the United Auto Workers.
There was little initial reaction to news that the United States and China had set up two working groups on economic and financial policy as they look to stabilise relations.
The Economic Working Group will discuss macroeconomic issues, while the Financial Working Group will focus on regulatory and financial stability issues, a senior US Treasury Department official said.
In Hong Kong, worries about China’s property sector returned as struggling developer China Evergrande tumbled about 20 percent after it called off a creditor meeting and said it had scrapped a planned restructuring.
– Key figures around 0300 GMT –
Tokyo – Nikkei 225: UP 0.6 percent at 32,590.33 (break)
Hong Kong – Hang Seng Index: DOWN 1.3 percent at 17,818.73
Shanghai – Composite: DOWN 0.3 percent at 3,122.00
Dollar/yen: UP at 148.38 yen from 148.36 yen on Friday
Euro/dollar: UP at $1.0649 from $1.0647
Pound/dollar: UP at $1.2242 from $1.2240
Euro/pound: UP at 86.99 pence from 86.96 pence
West Texas Intermediate: UP 0.2 percent at $90.23 per barrel
Brent North Sea crude: UP 0.3 percent at $93.56 per barrel
New York – Dow: DOWN 0.3 percent at 33,963.84 (close)
London – FTSE 100: UP 0.1 percent at 7,683.91 (close)