(Bloomberg) — Stocks in Asia fell 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 were little changed after a report showed expansion in the Caixin purchasing managers’ indexes. Contracts on US equities edged lower after the S&P 500 fell 0.7% in Tuesday trading.
Taiwanese equities weakened on news that the region had been hit by the strongest earthquake in 25 years. Shares in Taiwan Semiconductor Manufacturing Co. were lower as the company evacuated factory areas following the shock, endangering production at the world’s largest maker of advanced chips.
Pressure on US 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. Traders now project fewer rate cuts in 2024 than the central bank itself.
“Stock bulls may find it difficult justifying buying stocks at these elevated levels as yields rise,” said Fawad Razaqzada at City Index and Forex.com. “Rising crude oil prices pose additional risk to the inflation outlook. Additionally, numerous jobs reports are expected throughout the week. Trading could be volatile.”
Treasuries were little changed 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 and New Zealand yields, which climbed Wednesday.
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 was steady to hold a rally over the past six sessions, while Bitcoin was little changed at around $65,500.
No Rush
As traders awaited remarks from Fed Chair Jerome Powell on Wednesday, they weighed comments from two officials who vote on monetary policy decisions this year. San Francisco Fed President Mary Daly and her Cleveland counterpart Loretta Mester said they still expect the central bank to cut rates three times in 2024 — though they’re in no rush to begin lowering borrowing costs.
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.
“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.”
In other corporate news, Tesla Inc. delivered just 386,810 vehicles in the first three months of the year, missing Bloomberg’s average estimate by the biggest margin ever in data going back seven years. The carmaker’s shares fell 4.9% Tuesday in New York.
Key events this week:
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Eurozone CPI, unemployment, Wednesday
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Japan services PMI, 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 fell 0.1% as of 10:51 a.m. Tokyo time
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Japan’s Topix fell 0.3%
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Australia’s S&P/ASX 200 fell 1.1%
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Hong Kong’s Hang Seng fell 0.5%
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The Shanghai Composite fell 0.1%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0772
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The Japanese yen was little changed at 151.60 per dollar
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The offshore yuan was little changed at 7.2575 per dollar
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The Australian dollar fell 0.1% to $0.6510
Cryptocurrencies
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Bitcoin was little changed at $65,673.23
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Ether rose 0.7% to $3,294.35
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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