Shifting Fed Views Boost Dollar, Weigh on Stocks: Markets Wrap

By Pune Media On Oct 23, 2024 22

(Bloomberg) — The dollar rose, weighing on Asian shares as risk appetite stayed subdued given the prospect of less aggressive Federal Reserve interest rate cuts.

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The greenback strengthened against all Group-of-10 currencies, as 10-year Treasury yields extended gains after topping 4.2% for the first time since July earlier this week. Joining a global bond selloff, yields on Japan’s 40-year sovereign notes also rose to the highest in 16 years.

A gauge of Asian equities shed 0.2%, amid declines in Japan and modest gains in South Korea. US futures edged lower. Hong Kong and mainland Chinese shares were outliers, rising after a top government-linked think tank called on authorities to issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund.

The broader lackluster performance of equities comes as investors have pared back bets on rapid policy easing, on signs that the US economy remains robust and concerns about wider fiscal deficits after the presidential election. Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions.

“Asia is mostly on its back foot,” said Vishnu Varathan, Asia head of economics and strategy for Mizuho Bank. “USD is dominating against a backdrop of Fed speak suggesting more gradual cuts, IMF revisions suggesting relative US exceptionalism holding up, and the absence of follow-through bulls in China.”

Bank of America Corp. Chief Executive Officer Brian Moynihan was among the latest to join the monetary policy debate, urging Fed policymakers to be measured in the magnitude of interest-rate reductions.

The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession.

Back in Asia, two stock listings were in the spotlight. Tokyo Metro Co.’s shares rose as much as 47% in their debut, after the company raised 348.6 billion yen ($2.3 billion) in the country’s largest initial public offering since mobile carrier SoftBank Corp. listed in 2018. In Hong Kong, China Resources Beverage Holdings Co. gained 14%, showing strong response to one of the city’s biggest initial public offerings this year.

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Meanwhile, Goldman Sachs Group Inc. tactically lowered Indian equities to neutral from overweight as slowing economic growth dents the outlook for corporate earnings.

Oil fell as a US industry group signaled a rise in nationwide crude inventories, and the Biden administration renewed efforts to secure a cease-fire in the Middle East. Gold dropped after climbing to a fresh record.

Elsewhere, options traders are increasing bets that Bitcoin will reach $80,000 by the end of November no matter who wins the US election.

In corporate news, Texas Instruments Inc. gave a downbeat outlook for the current period even after topping estimates. Starbucks Corp. pulled guidance for 2025 after sales plunged for a third consecutive quarter. McDonald’s Corp. slumped as its Quarter Pounders were linked to an E. Coli outbreak in the western part of the US.

Key events this week:

Canada rate decision, Wednesday
Eurozone consumer confidence, Wednesday
US existing home sales, Wednesday
Boeing, Tesla, Deutsche Bank earnings, Wednesday
Fed’s Beige Book, Wednesday
US new home sales, jobless claims, S&P Global Manufacturing and Services PMI, Thursday
UPS, Barclays earnings, Thursday
Fed’s Beth Hammack speaks, Thursday
US durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 12:56 p.m. Tokyo time
Japan’s Topix fell 0.4%
Australia’s S&P/ASX 200 was little changed
Hong Kong’s Hang Seng rose 1.6%
The Shanghai Composite rose 0.8%
Euro Stoxx 50 futures were little changed
Nasdaq 100 futures fell 0.1%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0802
The Japanese yen fell 0.4% to 151.75 per dollar
The offshore yuan was little changed at 7.1382 per dollar
The Australian dollar was unchanged at $0.6682

Cryptocurrencies

Bitcoin fell 0.7% to $67,034.49
Ether fell 0.7% to $2,613.26

Bonds

Commodities

West Texas Intermediate crude fell 0.2% to $71.62 a barrel
Spot gold fell 0.1% to $2,745.83 an ounce

This story was produced with the assistance of Bloomberg Automation.