Asian Stocks Fall as Fed Rate Cut Doubts Emerge: Markets Wrap
(Bloomberg) — Asian stocks fell in tandem with Wall Street as uncertainty over Federal Reserve interest-rate cuts and stretched technology valuations weighed on equities.
The MSCI Asia Pacific Index fell 1%, with almost three stocks declining for every one that gained. Still, the gauge was poised for its third advance in four weeks. The S&P 500 closed 1.7% lower while the Nasdaq 100 declined 2.1% Thursday. Attention was also on the pound Friday, which fell after the Financial Times said UK Chancellor Rachel Reeves was ditching a planned income tax rise.
Treasuries and a gauge of the dollar steadied as investors parsed commentary from Fed officials that cast doubt over a December rate cut. Also, the October jobs report will be released without a reading of the unemployment rate.
The moves dealt a fresh blow to risk sentiment, highlighted by heavy selling in high-flying tech giants amid mounting valuation concerns. Beneath the surface, some investors pointed to a rotation into more defensive sectors. With optimism over the US government’s reopening largely priced in, traders are now focusing on the upcoming wave of economic data, as the chances of a December Fed rate cut slip below 50%.
“Markets appear to be spooked to a large extent by AI froth fears,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank. “A Fed that is more likely to bide its time than race against it, makes it a lot less conducive for the tech rout, which typically tends to be more sensitive to Fed easing.”
While President Donald Trump signed legislation to end the longest shutdown in US history, it may still take a while for the federal bureaucracy to fully restart. Even so, the October jobs report will skip the unemployment rate as the household survey wasn’t conducted, US top economic adviser Kevin Hassett told Fox News.
Some traders are also concerned that the omission of key data due to the shutdown may bolster arguments for Fed officials to stand pat. Currently, traders are pricing in about an even chance that the Fed will hold or cut rates in December.
Chair Jerome Powell said last month that a reduction is “not a foregone conclusion,” with the decision to be premised on incoming information.
In separate statements, Fed Bank of St. Louis President Alberto Musalem said officials should move cautiously on rates with inflation running above target, while Cleveland counterpart Beth Hammack noted policy should remain “somewhat restrictive.” Minneapolis Fed President Neel Kashkari said he didn’t support the last cut and is undecided about December.
Elsewhere, Trump is readying substantial tariff cuts designed to address high food prices and a series of new trade deals as he seeks to address voter concerns over the cost of goods.
In Asia, investors await data due Friday on China’s home prices, retail sales and the jobless rate, following signs of sluggishness in the credit market. Bloomberg calculations based on data released by the People’s Bank of China on Thursday showed China’s credit expansion was the weakest in more than a year last month, dragged down by slower government bond sales and lackluster borrowing demand across the economy.
Corporate News:
Verizon Communications Inc. is discussing plans to announce job cuts next week that could downsize the company by as much as 20%. A wave of voluntary and early retirement programs in Japan is on track to hit a four-year high, as companies from Panasonic Holdings Corp. to Japan Display Inc. try to balance an aging workforce with the need to boost competitiveness. Japan Airlines Co. has sought proposals from manufacturers for up to 70 regional and turboprop aircraft. Tencent Holdings Ltd. posted a faster-than-anticipated 15% rise in revenue. Separately, it struck a deal with Apple Inc. that will see the iPhone maker handle payments and take a 15% cut of purchases in WeChat mini games and apps, resolving a high-profile dispute. Kioxia Holdings Corp. shares were set to fall by their daily limit after the NAND memory maker’s current-quarter outlook missed expectations elevated by bullish comments from bigger rivals. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 10:08 a.m. Tokyo time Japan’s Topix fell 0.8% Australia’s S&P/ASX 200 fell 1.4% Euro Stoxx 50 futures fell 0.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1632 The Japanese yen was little changed at 154.63 per dollar The offshore yuan was little changed at 7.0983 per dollar Cryptocurrencies
Bitcoin was little changed at $98,719.51 Ether rose 0.4% to $3,191.15 Bonds
The yield on 10-year Treasuries was little changed at 4.12% Japan’s 10-year yield was unchanged at 1.690% Australia’s 10-year yield advanced two basis points to 4.44% Commodities
West Texas Intermediate crude rose 1.1% to $59.31 a barrel Spot gold rose 0.4% to $4,188.73 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu.
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