By Wayne Cole
SYDNEY (Reuters) – Asian stocks fell on Wednesday and investors were wary of any hint of aggressiveness from the US Federal Reserve, as soaring asset valuations are heavily reliant on an endless supply of super cheap money. .
An impending dump of data on China’s retail sales and industrial production offered another reason for caution, with a modest slowdown in expected annual growth.
The movements were modest, except in the oil market, where prices reached the highest level since April 2019 due to a strong combination of post-pandemic demand and restricted production.
MSCI’s broader Asia-Pacific equity index outside of Japan barely moved, while China’s top-tier stocks fell 0.3%.
It fell 0.2%, but South Korean shares rose 0.6% to an all-time high after five months of effort.
Both futures and the Nasdaq were largely unchanged. EUROSTOXX 50 futures were up 0.1% and futures 0.3%.
For traders, discretion was the best part of the value before the conclusion of the Fed’s two-day meeting later in the session.
Trading could be choppy during the event, as forecasts from Fed members could appear aggressive, while Fed Chairman Jerome Powell’s press conference has tended to appear dovish.
“We think President Powell will indicate that officials discussed talking about the cut, but the cut itself is still a bit far off given the Fed is still failing to make substantial gains in employment with payroll still 7.3 million below levels. pre-pandemic, “said NAB Chief Financial Officer Tapas Strickland.
The key will be the Fed members’ projections, or dot charts, for interest rates and whether further they now tip upward in 2023. Previously, only 7 out of 18 had seen such a move.
There could also be some bullish movement in inflation projections for this year and next, given the last two readings on shocked consumer prices to the upside.
BofA’s latest survey of fund managers suggests that most are optimistic about the outlook. About 72% said inflation was temporary, while only 23% saw it as permanent.
“Investors are in an optimistic position for permanent growth, transitory inflation and a peaceful reduction by the Fed through longs in commodities, cyclicals and financials,” said BofA, suggesting that the market was vulnerable to any hint of aggressiveness. from the Fed.
The bond market certainly looked calm with 10-year Treasury yields holding at 1.50%, just above a recent four-month low of 1.428%.
The Fed’s stubborn stubbornness has kept the dollar generally tight, though it made a month-long high overnight against a basket of currencies. The last one was at 90,519 and now it goes here for now.
The dollar was a bit firmer against the yen at 110.09, but below resistance around 110.33. The euro held at $ 1.2122, having found support near $ 1.2090.
In commodity markets, gold was pegged at $ 1,854 an ounce and not far behind a month at $ 1,843.
Oil prices continued their bull run to their highest level in more than two years amid signs of stronger demand and still-tight supplies.
It rose 48 cents to $ 74.47 a barrel and was targeting the 2019 peak of $ 75.63, while adding 48 cents to $ 72.60.