Shares in Asia followed equities on Wall Street after US inflation cooled ahead of the Federal Reserve’s policy decision later on Wednesday.
Shares in Hong Kong, Japan, South Korea and Australia rose in a sign of growing appetite for riskier assets, along with US equity futures. Shares in mainland China fluctuated.
Still, volatility in Asia’s major country indices was limited to around 1%, reflecting a degree of caution that was also seen in the S&P 500 closing below its session highs. Investors await more signals on the Fed’s path from later Wednesday’s decision and Chairman Jerome Powell’s briefing.
The dollar gauge was trading flat after Tuesday’s lowest since June, while emerging market currencies strengthened against the greenback. The New Zealand dollar declined, intensifying after the government warned there was a possibility of a recession next year.
Australian bonds due to a rate-sensitive maturity of three years were higher. Treasuries rose on Tuesday after Powell’s key measure of services prices excluding energy and rents edged lower again in November. While price pressures appear to have peaked, the headline CPI remains above 7%, suggesting the Fed has more to do to rein in inflation.
“The market is now expecting a slowing of growth and a moderation of the peak terminal rate in the US,” said Kelly Wood, deputy head of fixed income at Schroders in Sydney. rate cycle given the level of inflation in the US economy.”
A dovish revaluation swept the rates markets on Tuesday. Bets tilted toward a quarter-point increase in early February with a half-percentage point move by the Fed. In addition, the swap pegged the peak Fed policy rate by May at about 4.85%, about 5% below Tuesday’s inflation print. The current Fed policy range is 3.75% to 4%.
Following the Fed, the European Central Bank will announce its rate decision on Thursday. Markets will also head off decisions by the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.
The text of this story is published from a wire agency feed without any modification. Only the headline has been changed.
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