GLOBALMARKETS-Asia stocks remain steady, but the dollar is firm as investors look at a higher rate outlook
By Scott Murdoch
SYDNEY – Tuesday saw Asian share market stability after a steep loss in the last 24 hours. However, the U.S. dollar remained elevated due to investors weighing the possibility of interest rates remaining higher for longer periods in many developed countries.
MSCI’s broadest index for Asia-Pacific shares outside Japan was 0.4% higher after U.S. stocks closed the previous session with moderate losses.
Australia’s S&P/ASX200 was trading higher ahead of the Reserve Bank’s decision but slid into negative territory after the official cash rate was raised by 25 basis points. Close to 0.5% was the closing price of the benchmark index.
Japan’s Nikkei stock exchange also saw initial gains erased to ease 0.1%.
Hong Kong’s Hang Seng Index traded 0.67% higher, while China’s bluechip CSI300 Index rose 0.07%.
As expected, the RBA met its expectations by ordering a ninth consecutive rate hike.
The current cash rate in Australia is 3.35%. This is the highest level in a decade.
The Euro Stoxx 50 futures in early European trades were up 0.17% @ 4,218, the German DAX futures at 15,409 were up 0.09%, while the FTSE futures at 7,815.
U.S. stock futures, the S&P 500 e-minis, were up 0.13% at 4,128.8.
Kerry Craig, JPMorgan Asset Management’s global strategist for markets, said that “sentiment in the markets is dominated central banks and repricing rates yet again.”
“Equities are on a strong run and it’s no surprise to see an air pockets emerge right now.
“It’s quiet week for global economic data and when this is the case uncertainty about interest rates is a dominant theme among investors.”
In Asia, the yield on benchmark 10-year Treasury Notes hit 3.6192% as compared to the close at 3.632% Monday in the United States.
The yield on the two-year note was 4.4267%, compared to a close at 4.456% in the United States.
After January’s strong U.S employment growth, which saw employment rise 517,000, this was more than twice what economists had expected. The unemployment rate was 3.4%, which is the lowest level in 53 years.
Investors will closely follow the speech of Jerome Powell, Federal Reserve Chairman, at the Economic Club of Washington on Tuesday.
Overnight on Wall Street, the Dow Jones Industrial Average fell 0.1%, the S&P 500 lost 0.61% and the Nasdaq Composite dropped 1%.
The market has priced in the expectation that the Fed Funds Rate will peak at just above 5%, and it now only anticipates very limited rate reductions, just one of the 25 basis points by year’s end,” ANZ economists wrote.
“It’s clear that sentiment is fragile, data dependent, and this defensive posture may have more to go near term as risks are reduced.”
After touching a high of 132.9 in the U.S. trading session, the dollar fell 0.28% to 132.28 against the Japanese yen.
The euro single currency gained 0.1% at $1.0739 on the day, after losing 1.13% in one month.
The dollar index, which measures the greenback against a basket major trading partner currencies, fell marginally to 103.45 from U.S. trading levels. However, it is still above its February 3 low of 101.55.
U.S. crude rose by 0.86%, to $74.75 a barrel. Brent crude oil rose to $81.6 a barrel.
The price of gold was slightly higher. Spot gold was sold at $1873.65 an ounce
(Editing by Shri Navaratnam & Simon Cameron-Moore)