WASHINGTON, Aug 23 — Federal Reserve Chair Jerome Powell stressed today that the central bank will act to ensure the US economic expansion continues, even in the face of “significant risks” posed by slowing global growth. But as Beijing…
TOKYO: Asian shares struggled to make headway on Friday as uncertainty over how much further the U.S. Federal Reserve would cut interest rates added to investors’ worries over slowing global growth.
With a trade war between the United States and China dragging on, and political tumult in Hong Kong, Italy and Britain adding to the tense backdrop, investors were keenly awaiting Fed Chair Jerome Powell’s speech at a gathering of central bankers in Jackson Hole, Wyoming, later in the day (1400 GMT).
MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.1% higher and was up 0.8% for the week, on track to break a four-week losing streak.
Japan’s benchmark Nikkei added 0.3% and Australian stocks rose 0.3%.
The Shanghai Composite and the blue-chip CSI300 were up 0.5% and 0.7%, respectively, while Hong Kong’s Hang Seng gained 0.5%.
Business surveys on Thursday suggested further slowing in advanced economies in August, but service sector activity remained resilient, offsetting some of the drag from weak manufacturing.
“It’s going to be another wait-and-see day for traders ahead of Powell’s Jackson Hole speech. Investors are hoping for some soothing words from him,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Wall Street stocks were mixed on Thursday, with the S&P 500 closing little changed, while the Dow was up 0.2% and the Nasdaq falling 0.4%.
In the U.S. bond market, the closely watched two-year, 10-year Treasury yield curve briefly moved back into inversion overnight, a shift that also occurred last week and sent financial markets into a tailspin amid worries of a sharp global downturn.
An inversion in the U.S. yield curve has presaged several past U.S. recessions, raising fears the decade-long expansion in the world’s biggest economy might be nearing its end.
While markets overwhelmingly expect the Fed to follow up its first rate cut in a decade with more stimulus at its meeting next month, some policymakers disagree.
Kansas City Fed President Esther George, who dissented against the decision to ease in July, and Philadelphia Fed President Patrick Harker, who said he “reluctantly” supported the cut, both said the U.S. economy does not need more stimulus at this point.
Dallas Fed President Robert Kaplan said the businesses had become much more cautious due to surprises on trade policy and he was “going to at least be open-minded about making some adjustment” if he sees continued weakness.
All of that has made Powell’s speech in Jackson Hole pivotal for markets as they look for any clues on future easing, after the Fed last month cut rates for the first time since the financial crisis.
Any indications of hawkishness in the Fed chief’s comments might hurt riskier assets, though the dollar stands to benefit.
The greenback slipped on Thursday, but moved within narrow ranges. In early Asian trading, the dollar was up 0.1% against a basket of major currencies to 98.293.
The euro also was little changed against U.S. currency at $1.1073. A survey showing a surprise uptick in euro zone business growth for August was offset somewhat by trade war fears knocking future expectations to their weakest in over six years.
The pound jumped to a three-week high of $1.2273 overnight after traders interpreted comments from German Chancellor Angela Merkel to mean that a solution to the Irish border problem could be found before Britain leaves the European Union on Oct. 31.
Merkel on Wednesday challenged Britain to come up with alternatives to the Irish border backstop within 30 days, but French President Emmanuel Macron cautioned there would be no renegotiation of the Brexit deal. Sterling last quoted at $1.2234, 0.1% weaker on the day.
China’s yuan extended losses, threatening to stoke trade tensions between Washington and Beijing.
Spot yuan slid to as low as 7.0992 per dollar, its weakest since March 2008, although the central bank set the midpoint rate at 7.0572, its weakest level in 11-1/2 years, but was much stronger than traders had expected.
Washington labelled China a currency manipulator early this month after a sharp slide in the yuan.
Concern about China’s economy is growing because U.S. tariffs on roughly $150 billion of Chinese goods will take affect from Sept. 1.
Oil prices weakened overnight, with both Brent crude and U.S. West Texas Intermediate down 0.6% each, on worries about the global economy.
Brent crude was last up 0.3% at $60.11 per barrel and WTI crude added 0.2% to $55.46.
Gold prices dipped on Thursday but held near the pivotal level of $1,500 per ounce, underpinned by demand for the precious metal amid uncertainties around monetary policy, trade and geopolitical tensions. Spot gold was last down 0.2% at $1,494.99 an ounce. – Reuters
TOKYO, Aug 23 ― Asian shares struggled to make any headway today as weak US manufacturing activity and uncertainty over how much further the Federal Reserve would cut rates added to the general air of caution in markets buffeted by global growth…
WASHINGTON, Aug 22 — When the leader of the Federal Reserve speaks, the world listens. But the relentless attacks by US President Donald Trump ensure Fed Chair Jerome Powell’s speech tomorrow will be subjected to an even more intense spotlight….
PETALING JAYA: Domestic bond yields continue to face downward pressure from the prospect of a low global interest rate environment and consequent search for yield, according to RAM Ratings.
The rating agency highlighted that over the past few months, a number of central banks have lowered their policy rates, which have tilted investors’ interest rate expectations downwards.
“As widely anticipated, the Fed had cut its policy rate band by 25 bps on 31 July 2019, albeit assuring investors that the cut does not mark the beginning of an easing cycle.
“Nevertheless, the market has so far priced in another rate cut in September amid global growth concerns,” it said in a statement today.
RAM said government bond issuance activity stayed robust in July with total Malaysian Government Securities and Government Investment Issue of RM10.5 billion against RM8 billion recorded in June.
Bid-to-cover ratios at government auctions are consistent with the robust demand seen in July, with all issues that were up for tendering achieving a ratio of above two times.
RAM said the shift in the interest rate landscape had sparked a renewed hunt for yields among foreign investors.
“Increased demand for higher-yielding bonds had led to a net inflow of RM5.7 billion into the Malaysian bond market in July versus RM6.6 billion in June.”
As a result, it led to a broad-based retreat in yields across the maturity spectrum and rating bands in July.
“We do not envisage this downward pressure to subside in August as investors remain on the lookout for more rate cuts by the Fed next month,” said the rating agency.
However, the prospect of a global growth slowdown and the fear of a looming recession signalled by an inverted US treasury yield curve, has the potential to dampen investor appetite for emerging market assets.
But, RAM said, the impact on Malaysia so far has been largely confined to the domestic equity market.
It noted that the FTSE Bursa Malaysia Composite Index has been on a downward trend since the start of July, while demand for fixed-income instruments led to a bond price rally during the month.
“Prevailing uncertainties and growing concerns over global growth momentum pave a path for further loosening of global liquidity conditions going forward. The hunt for yield in the emerging market assets will continue so long as an attractive yield differential is maintained, thus providing a counter to potential
rationalisation of passive investor flows in the market,” said RAM head of research Kristina Fong.
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JAKARTA, Aug 22 — Indonesia’s central bank announced a surprise interest rate cut today as it looks to offset tepid global growth, after South-east Asia’s biggest economy posted its slowest quarterly expansion in two years. Bank Indonesia (BI)…
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NEW YORK: Wall Street stocks resumed their upward climb Wednesday, shrugging off a key warning sign in the Treasury bond market and barreling higher following strong results from retailers.
US stocks finished with solid gains for the third out of four sessions on a day in which European bourses also rallied.
Wall Street was in positive territory the entire day and did not move appreciably near the end of the session, when yields on the two- and 10-year Treasury notes, a harbinger of past recessions and a trigger for a major selloff earlier this month.
Strong earnings from US big-box chains Target and Lowe’s, coupled with other good US retail sales reports, “helped mitigate the ‘recession fear’ communicated previously on the first inversion of the 2s10s spread, because they underscored for the market that the US consumer is still in good shape,” said Briefing.com analyst Patrick O’Hare in an email.
Investors believe the flattening or inversion has been precipitated other factors in Europe and Japan rather than “by a trade of true economic angst pertaining to near-term economic prospects for the US.”
A strong indicator of US consumer resilience was a blowout earnings report from Target, Walmart’s smaller rival, which surged more than 20 percent after reporting higher profits on increased sales and consumer traffic.
“With both Target and Walmart producing good sets of numbers, the middle American consumer is clearly alive and well,” said GlobalData Retail analyst Neil Saunders.
Minutes from the Federal Reserve’s July 30-31 policy meeting said the US central bank will remain flexible and interest rates will not be on a “preset course” in the face of persistent risks from trade uncertainty and weak global growth.
On July 31, policymakers cut the key interest rate for the first time in more than a decade, a move characterized in the minutes as “part of a recalibration… or mid-cycle adjustment.”
The minutes “didn’t dissuade investors from the concept that the Fed might be lined up to cut rates again at some point this year,” said Art Hogan chief market strategist at National Securities.
The minutes come ahead of a much-anticipated appearance Friday by Fed Chair Jerome Powell at an annual central bank gathering in Jackson Hole, Wyoming.
Key European equity markets climbed more than one percent.
That included Milan’s FTSE MIB index which rallied as Italian President Sergio Mattarella began talks with key players in a bid to end political limbo in the eurozone’s number three economy.
The index had dived 1.1 percent on Tuesday after the shock resignation of prime minister Giuseppe Conte.
Investors appeared to believe the crisis would be short-lived with the much-watched gap between German and Italian bond yields shrinking, indicating the markets do not perceive significant risk at this stage.
“If they manage to form a new government, it would be welcomed with some caution by other EU leaders who might see it as an opportunity to avoid a showdown over Italy’s budget in the next few months,” said the director of Future Europe Initiative, Benjamin Haddad.
VTB analyst Neil MacKinnon was more downbeat. “There is an increasing risk of a fresh eurozone debt and banking crisis,” he cautioned. – AFP
WASHINGTON, Aug 21 —US tariffs on China will not fix the trade deficit, and neitherts, Internationa will weakening the US dollar through interest rate cul Monetary Fund economists said today. In unusually blunt language, the IMF warned that…