Asian stocks were mixed Thursday after Federal Reserve chairman Jerome Powell played down the prospect for interest-rate cuts and as fresh turmoil in the US banking sector renewed fears of a credit squeeze.
(Bloomberg) — Asian stocks were mixed Thursday after Federal Reserve chairman Jerome Powell played down the prospect for interest-rate cuts and as fresh turmoil in the US banking sector renewed fears of a credit squeeze.
Chinese shares whipsawed as they reopened a three-day break, while Hong Kong equities gained. Australian and South Korean shares fell. Futures contracts for the S&P 500 edged lower after the benchmark dropped on Wednesday following the Fed’s 25 basis-point rate hike and commentary that played down expectations for cuts later in the year.
Nasdaq 100 futures inched higher alongside a rally in Hong Kong technology stocks, indicating support for the sector after broadly positive first-quarter earnings.
Australian bonds rose following gains in US Treasuries. The yen extended a rally against most of its Group-of-10 peers, while the Bloomberg dollar index fell for a third day. Oil retraced some of the losses it made earlier this week when concerns over global growth weighed on the commodity.
US regional lender PacWest Bancorp slumped 60% in US postmarket trading Wednesday, reigniting bank stability fears after people familiar said the Beverly Hills-based company had been weighing a range of strategic options, including a sale.
“The tightening in credit conditions will put some significant downward pressure on the economy,” Michelle Girard, head of US for NatWest Markets, said on Bloomberg Television. “You will see the Fed in a position to move policy to a less restrictive stance sooner than what the Fed chairman today was suggesting.”
The rate debate will resume again later Thursday, with the European Central Bank taking center stage. Policymakers are seen raising the deposit rate by a quarter-point to a 3.25%, which would mark a slowdown in their hiking cycle. The decision is expected at 2:15 p.m. in Frankfurt, followed half an hour later by President Christine Lagarde speaking at a press conference.
Read More: Wall Street Greets ‘End of the Hiking Cycle’ With More Questions
“Potential Fed pause, but no Fed pivot yet,” said Jason Pride at Glenmede. “The Fed is telegraphing that additional monetary tightening may or may not occur, but rate cuts do not yet appear to be on the table. The Fed’s leadership is working hard to thread the needle between telegraphing too much tightening while also not agreeing with the market’s rate cut narrative.”
Key events this week:
- US initial jobless claims, trade balance, Thursday
- European Central Bank rate decision, followed by ECB President Christine Lagarde’s news conference, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10:50 a.m. Tokyo time. The S&P 500 fell 0.7%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.6%
- Australia’s S&P/ASX 200 fell 0.3%
- Hong Kong’s Hang Seng rose 0.2%
- The Shanghai Composite fell 0.2%
- Euro Stoxx 50 futures fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $1.1081
- The Japanese yen rose 0.1% to 134.57 per dollar
- The offshore yuan rose 0.2% to 6.9067 per dollar
Cryptocurrencies
- Bitcoin rose 1.8% to $29,045.98
- Ether rose 1.4% to $1,900.05
Bonds
- The yield on 10-year Treasuries declined nine basis points to 3.34%
- Australia’s 10-year yield declined six basis points to 3.35%
Commodities
- West Texas Intermediate crude rose 0.7% to $69.10 a barrel
- Spot gold rose 0.3% to $2,044.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Rita Nazareth.
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