Pedestrians walk past an electronic board displaying the Nikkei stock average in front of a brokerage firm in Tokyo, Japan, October 31, 2023. Portal/Kim Kyung-Hoon/File Photo ACKNOWLEDGE RIGHTS
- Two-year Treasury yields hit a four-month low
- The dollar is largely sliding; Gold hits 7-month high
- Stocks in China and Hong Kong fall
SINGAPORE, Nov 29 (Portal) – Government bond yields and the dollar hit multi-month lows on Wednesday after a Fed official made fresh references to U.S. interest rate cuts, while New Zealand’s dollar rose after its central bank said another Interest rate hikes may be necessary if… Inflation is proving stubborn.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) briefly hit a one-week high before weakness in technology stocks in Hong Kong led to a 0.3% loss.
Japan’s Nikkei (.N225) fell 0.3%.
The New Zealand dollar was last up 0.9% after breaking resistance above 62 US cents and hitting a four-month high.
The euro, yen, sterling, Australian dollar, yuan, Swiss franc and a host of emerging Asian currencies also hit new multi-month highs against the dollar, while gold shot to a seven-month high above $2,501 an ounce.
Federal Reserve Governor Christopher Waller – an influential and previously hawkish voice at the Federal Reserve – told the American Enterprise Institute on Tuesday that interest rate cuts could begin in a few months, assuming inflation continues to ease.
Fed fund futures rallied on the comment, pricing in cuts worth more than a hundred basis points (bps) in 2024 and a 40% chance of them starting as early as March. Two-year Treasury yields fell sharply, hitting new lows in the Asian session.
“The market clearly moved because Governor Waller opened up the possibility of cuts,” said Tapas Strickland, head of markets at National Australia Bank in Sydney. Waller’s remark echoed previous comments from Fed Chair Jerome Powell.
The two-year yield hit 4.69%, its lowest level since mid-July, and the benchmark 10-year yield fell 6 basis points to its lowest level since September at 4.28%.
The dollar was last down 0.2% at 147.15 yen, after trading at 146.68 earlier in the day, the lowest since September 12. It hit a three-and-a-half-month low of $1.1017 per euro.
CONDITIONALITY
Waller’s comments extended the two-week rally in stocks and bonds around the world since a positive U.S. inflation report two weeks ago – with the exception of China, where doubts about the economy and a deepening housing crisis are decidedly discouraging investors.
Global stocks (.MIWD00000PUS) rose nearly 9% in November and are heading for their best month in three years. The Hang Seng (.HSI) is down 0.4% and has not recorded a positive month since July.
The latest negative news came from Meituan (3690.HK), which pointed to slowing growth in the fourth quarter of its main food delivery business. Its shares plunged 12% to a three-and-a-half-year low on Wednesday despite the company promising a $1 billion buyback.
The Hang Seng fell 2.4% on Wednesday. Interbank interest rates in Hong Kong are at their highest in 23 years, suggesting cash is flowing out of the Asian financial hub and causing problems for mortgage holders whose payments are often tied to one-month interest rates.
Mainland blue chips (.CSI300) fell 1% and are heading for their fourth straight monthly decline with a 2.5% decline in November.
Some analysts also worry that markets have bought into parts of Fed officials’ comments – hinting at possible interest rate cuts – even though the comments were conditional on further declines in inflation and a continued tight financial environment.
New Zealand issued some caution on Wednesday as the central bank slightly raised its interest rate forecasts and warned that rate hikes may not be complete yet.
“Bets should be based on the condition that policy is appropriately tight and not indulge in overconfidence that the Fed is done (based on linear inflation forecasts),” said Mizuho economist Vishnu Varathan.
Elsewhere, inflation in Australia fell more than expected.
In commodities, Brent crude futures stabilized at $81.63 a barrel ahead of Thursday’s crucial OPEC+ meeting that will decide production policy over the next few months. However, prices were set for a monthly decline, while November iron ore futures in Singapore rose 9.6% to $130.50 a tonne.
Edited by Simon Cameron-Moore and Kim Coghill
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