HONG KONG (AFP) – Asian markets mostly rose yesterday as traders tracked another record day on Wall Street ahead of the Federal Reserve’s policy meeting, while the yen further weakened a day after Japan’s rare interest rate hike.
United States (US) monetary policymakers are widely expected to hold borrowing costs at a two-decade high, but traders will also be watching the “dot plot” of projections for how many cuts they see this year.
At the turn of 2024, markets had factored in up to six cuts, but a spate of strong data – particularly pointing to sticky inflation – has forced investors to revise that down to three.
That is in line with the Fed’s December projection, but there are worries policymakers could be spooked into lowering their outlook to just two – or 50 basis points.
Some market participants are also concerned that the first reduction – anticipated by many to come in June – could be pushed back.
“It would only take two participants to move their dots to move the median to 50 basis points of cuts for this year,” warned Citigroup’s Veronica Clark.
“We are thinking the Fed is okay with where they are now. But it is definitely the risk.”
Still, Wall Street investors remained upbeat, pushing all three main indexes higher on the back of a tech rally, with the S&P 500 chalking up another record.
“Since the start of this year, expectations about 2024 central bank easing have been pared back materially,” JP Morgan economists wrote in a recent investor note.
“But that has not disrupted the general trend toward an easing in global financial conditions.”
Asian dealers were a little less enthusiastic in the early exchanges but grew more optimistic as the day wore on.
Hong Kong, Shanghai, Mumbai, Seoul, Singapore, Wellington and Manila rose, but there were losses in Sydney, Jakarta and Bangkok.
Tokyo was closed for a holiday.
London dipped at the open even as data showed United Kingdom (UK) inflation fell more than expected last month.
Paris also dipped and Frankfurt was flat.
