HONG KONG (AFP) – Asian markets diverged yesterday as investors brushed off a negative lead from Wall Street while welcoming a drop in Treasury yields and data showing United States (US) inflation was holding steady.
With the US heading into the Thanksgiving holiday, business in New York was subdued after a flurry of activity since Donald Trump’s election win at the start of the month.
That has allowed Asian traders to take a breather and digest recent developments as the president-elect builds a hawkish cabinet that looks set to renew his hardball approach to world trade.
Data out of Washington on Wednesday showed the personal consumption expenditures index – the Federal Reserve’s (Fed) preferred gauge of inflation – edged up to 2.3 per cent on-year in October
The figure was up from 2.1 per cent the previous month and in line with forecasts, while slightly above the Fed’s long-term two per cent target for price rises.
While the Fed appears to be getting a handle on inflation and the labour market is softening, investors have started to scale back their bets on how many rate cuts the central bank will make as they try to assess the impact of Trump’s plans to cut taxes and impose tariffs.
Futures markets currently place the odds at about two-thirds that officials will lower rates again in December by 25 basis points.
Still, all three main Wall Street indexes ended in the red, with the Dow and S&P 500 pulling back from record highs as investors shifted to the sidelines ahead of the festive break.
Treasury yields slipped, weighing on the dollar on Wednesday, though the greenback strengthened slightly in Asian trade.
Equity markets were mixed, with Tokyo, Sydney and Singapore all up, while Seoul also edged up after a second successive interest rate cut by South Korea’s central bank.
Wellington, Manila, Bangkok, Mumbai and Jakarta took a leg down. Dealers were also eyeing Beijing, amid speculation authorities will announce fresh stimulus measures at a key meeting expected next month.
However, analysts pointed out that hopes ahead of previous gatherings have largely been dashed by measures that fell short.
“China’s economy remains unbalanced as a solid export base for goods production is offset by the continued weakness of the property market and weak consumer spending,” Chief Asia Pacific Economist Steven Cochrane at Moody’s Analytics, said.
He added that “consumer confidence remains shattered, particularly regarding expectations for the labour market”.
While Beijing has introduced a raft of policies to boost growth – including interest rate cuts and measures to support the property sector – Cochrane said that “most issues weighing on the economy have not yet been resolved”.
In the crypto sphere, bitcoin was hovering around USD96,500, having bounced back from just below USD90,300 earlier in the week following its worst run since Trump’s electoral success.
Still, it is widely tipped to top USD100,000 on hopes the new president will try to ease restrictions on the digital currency market.
