Asian Shares Tumble as Fed’s Hawkish Stance Sinks Rate Cut Hopes
Asian shares participated in a global selloff on Friday, as hawkish remarks from Federal Reserve officials extinguished hopes for a US rate cut next month. Meanwhile, a still chaotic data calendar contributed to the unease, impacting bonds, the dollar, and even gold. Japan’s Nikkei fell by 1.8 percent on Friday, while Australia’s resource-driven shares decreased by 1.5 percent, and South Korea experienced a decline of 2.3 percent. China is set to release its monthly activity figures later today, following weak lending data that has raised concerns among households and businesses regarding their willingness to incur additional debt amid ongoing economic uncertainties. Overnight, market experienced significant declines, particularly in Nvidia and other AI giants due to valuation concerns. Meanwhile, Treasuries saw a retreat as investors reduced their expectations for a rate cut from the Fed in December to just 51 percent, a decrease from 63 percent the previous day.
The dollar struggled to gain momentum from rising yields, weakening against currencies such as the yen and Swiss franc. “The drawdown seen across assets was pronounced, and looking across the suite of investible markets there were few places to hide,” stated Chris Weston. “With the US government open for business, traders now await the Bureau of Labor Statistics schedule for key economic data…” Positioning has primarily been established based on Tier 2 data, which will require reconciliation with the headline data that genuinely influences the Fed’s decision-making process. The White House, however, tempered expectations for a more transparent understanding of the US economy in the near future, stating that the US The unemployment rate for October may remain unavailable. In a reflection of the prevailing somber sentiment and concerns regarding elevated inflation, an increasing number of Fed officials expressed reservations about additional rate cuts during the night.
Alberto Musalem stated that there is limited capacity to ease further without becoming excessively accommodating. Meanwhile, Cleveland Fed President Beth Hammack emphasized that interest rate policy should stay restrictive to exert downward pressure on inflation. Minneapolis Fed President Neel Kashkari stated that he was against a rate cut last month and remains uncertain about December. Treasuries declined overnight as investors reduced their expectations for a Fed cut next month. Two-year Treasury yields remained steady at 3.597 percent, reflecting a rise of 3 basis points overnight. Meanwhile, the 10-year yield increased by 1 basis point to 4.125 percent, following a gain of 3 basis points overnight. The increase in yields, nonetheless, did not bolster the US dollar, which declined by 0.2 percent against its major counterparts overnight, settling at 99.254, near its lowest point in two weeks. The yen received a much-needed reprieve, last trading at 154.7 per dollar, slightly above a nine-month low of 155.05 per dollar. The Swiss franc surged 0.6 percent against the dollar.
Sterling, however, declined by 0.3 per cent to $1.3153 on Friday following a report from the Financial Times indicating that Prime Minister Keir Starmer and finance minister Rachel Reeves have abandoned their plan to raise income tax rates, which was seen as a departure from their manifesto commitments. Oil prices experienced an increase in early trading; however, they were on track for a third consecutive week of declines. US West Texas Intermediate crude increased by 0.4 percent to $58.91, although it has decreased by 1.4 percent this week. Spot gold prices increased by 0.3 percent to $4,183 per ounce, following a 0.6 percent decline overnight that ended a four-day winning streak. It stayed significantly below its record high of $4,381.
