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Jerome Powell’s indication that the battle against inflation could take longer than expected weighed on hopes for interest rate cuts this year – Copyright GETTY IMAGES NORTH AMERICA\/AFP JUSTIN SULLIVAN<\/small><\/em><\/p>\nAsian markets fluctuated Wednesday as Federal Reserve boss Jerome Powell\u2019s indication that interest rates could stay higher for longer offset a rebound following the latest bout of Middle East-fuelled selling.<\/p>\n
While traders are nervously awaiting Israel\u2019s next move after Iran\u2019s missile and drone attack at the weekend, the lack of an immediate response has seen them focus on the US central bank\u2019s monetary policy plans.<\/p>\n
A string of hotter-than-expected data on inflation and jobs in the first three months has forced investors to whittle down their bets on how many interest rate cuts the Fed will make this year.<\/p>\n
And Powell all but confirmed that borrowing costs will likely have to remain elevated longer than previously hoped.<\/p>\n
\u201cThe recent data have clearly not given us greater confidence and instead indicate that is likely to take longer than expected to achieve that confidence,\u201d he warned Tuesday in Washington.\u00a0<\/p>\n
\u201cGiven the strength of the labour market and progress on inflation so far, it is appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us.\u201d<\/p>\n
The bank\u2019s most recent \u201cdot plot\u201d guidance for rates suggested it will cut three times this year, with June eyed for the first.<\/p>\n
Traders had priced in as many as six cuts at the start of the year.<\/p>\n
But observers are now predicting just one or two at best \u2014 starting in July or September \u2014 with some even arguing that the next move could even be a hike if inflation refuses to come back down to the Fed\u2019s two percent target.<\/p>\n
His remarks chime with several officials at the Fed, who have urged caution on when to begin normalising rates.<\/p>\n
Richmond Fed chief Thomas Barkin said Tuesday that the recent run of indicators had not supported the idea of a soft landing for the economy, while Fed Vice Chair Philip Jefferson saw inflation coming down but rates remaining elevated for now owing to price pressures.<\/p>\n
The S&P 500 and Nasdaq both fell in New York, though the Dow eked out a gain.<\/p>\n
Asia was mixed, with Tokyo, Hong Kong and Seoul down but Shanghai, Sydney, Singapore, Wellington, Taipei and Manila rising.<\/p>\n
\u201cThe hawkish tone from Powell didn\u2019t come as much of a surprise, considering the persistent inflationary challenges, the robust state of the US economy, and the Fed\u2019s commitment to data-driven decision-making,\u201d said Stephen Innes of SPI Asset Management.<\/p>\n
\u201cAnything short of reaffirming the \u2018higher for longer\u2019 would likely have raised even more questions about the Fed\u2019s credibility.\u201d<\/p>\n
Traders are keeping an eye on developments in the Middle East after Israel\u2019s army chief General Herzi Halevi warned that there would be a response to Iran\u2019s barrage on Saturday, fuelling worries of a region-wide conflict.<\/p>\n
Tehran said the attack was in retaliation for a strike on the consular annex of its Damascus embassy that killed seven Revolutionary Guards, though it said: \u201cThe matter can be deemed concluded\u201d.<\/p>\n
While on edge for any further escalation, trading floors are relatively calm Wednesday, with oil prices edging down despite the crises in the Middle East, Ukraine and OPEC output cuts.<\/p>\n
\u201cOur base case is one where tensions remain contained (in the Middle East), avoiding a wider conflict that disrupts oil supply,\u201d Han Zhong Liang, of Standard Chartered, said.<\/p>\n
\u2013 Key figures around 0250 GMT \u2013<\/p>\n
Tokyo \u2013 Nikkei 225: DOWN 0.2 percent at 38,404.45 (break)<\/p>\n
Hong Kong \u2013 Hang Seng Index: DOWN 0.5 percent at 16,176.21\u00a0<\/p>\n
Shanghai \u2013 Composite: UP 1.1 percent at 3,038.92\u00a0<\/p>\n
Dollar\/yen: DOWN at 154.65 yen from 154.72 yen on Tuesday<\/p>\n
Euro\/dollar: UP at $1.0634 from $1.0622\u00a0<\/p>\n
Pound\/dollar: UP at $1.2439 from $1.2426<\/p>\n
Euro\/pound: UP at 85.48 pence from 85.45 pence<\/p>\n
West Texas Intermediate: DOWN\u00a00.5 percent at $84.90 per barrel<\/p>\n
Brent North Sea Crude: DOWN 0.5 percent at $89.59 per barrel<\/p>\n
New York \u2013 Dow: UP 0.2\u00a0percent at 37,798.97 (close)<\/p>\n
London \u2013 FTSE 100: DOWN 1.8 percent at 7,820.36 (close)<\/p>\n<\/p><\/div>\n
Stocks swing after latest selloff as Fed, Middle East dampen sentiment
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#Stocks #swing #latest #selloff #Fed #Middle #East #dampen #sentiment<\/p>\n","protected":false},"excerpt":{"rendered":"
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