By Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks stumbled and the dollar was near a one-month high on Wednesday as hawkish rhetoric from central bankers beat back bets of early interest rate cuts, while geopolitical worries kept risk sentiment in check.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.31%, touching a fresh one-month low. Japan’s Nikkei shrugged off the broader malaise and was perched at a new 34-year peak.
U.S. Federal Reserve Governor Christopher Waller said on Tuesday that while inflation was approaching the central bank’s 2% goal, the Fed should not rush to lower interest rates until lower inflation can clearly be sustained.
Waller’s comments echoed sentiments of European central bankers, who have also pushed back against market expectations of early and steep rate cuts.
“Waller’s comments were reflected in rate markets, with markets seemingly becoming a bit more sceptical that the Fed can deliver the aggressive cuts of over 160 basis points,” said Kieran Williams, head of Asia FX at InTouch Capital Markets.
Markets are pricing in a 65% chance of a rate cut by the Fed in March, according to the CME FedWatch tool, compared with the 81% likelihood at the start of the week.
Geopolitical worries have also sapped sentiment as investors keep an eye on developments in the Red Sea, Gaza and Ukraine.
China stocks will likely be the focus during the Asian hours, with its GDP data due to be released at 0200 GMT. China’s blue chip stocks opened slightly lower.
China’s economy likely perked up slightly in the fourth quarter, enabling the government to hit its growth target after the previous year’s miss, but the outlook for 2024 remains shaky amid a protracted property slump and weak consumer confidence.
Chinese Premier Li Qiang in a keynote speech to business leaders at the World Economic Forum (WEF) in Davos said that the Chinese economy had rebounded and moved upwards, and was estimated to have grown around 5.2% in 2023, above the official target of around 5%.
Overnight, U.S. stocks ended lower after mixed earnings from Morgan Stanley and Goldman Sachs pressured banks, and as sell-offs in Boeing and Apple weighed on the S&P 500. [.N]
In currency markets, the dollar index, which measures the U.S. currency against six rivals, rose 0.019% and was hovering near the one-month high of 103.42 it touched on Tuesday.
The Japanese yen weakened 0.09% to 147.34 per dollar, while Sterling was last at $1.2635. [FRX/]
U.S. crude fell 0.66% to $71.92 per barrel and Brent was flat on the day. [O/R]
Gold prices were little changed at $2,028 in Asian hours after dropping 1% in the previous session on the stronger dollar. [GOL/]
(Editing by Muralikumar Anantharaman)
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