TOKYO, Nov 8 — Treasury yields and the dollar hovered above multi-week lows today as markets grappled with the possibility of another US interest rate hike while waiting on comments from Federal Reserve Chair Jerome Powell for a steer on the policy outlook.
Crude oil sank to a three-month low after data showed a steep build in US stockpiles, while worries about the Chinese economy weighed on the outlook for demand.
Equities were mixed in Asia, with gains for tech stocks offset by slumping commodity shares. Wall Street futures EScv1 pointed slightly lower following gains across the big three indexes overnight, led by a 0.9 per cent rally for the tech-heavy Nasdaq.
Expectations have been building in recent days that US policy rates have peaked and cuts could begin as early as May, following a softening in key monthly jobs data at the end of last week and a tempering in the Fed’s hawkish stance. However, investors remain sensitive to the possibility of more hikes amid guarded remarks from Fed officials.
Fed Governor Christopher Waller said yesterday that the economy bears watching after “blowout” third-quarter GDP figures, while fellow governor Michelle Bowman said she still expects higher rates will be needed. Powell speaks today an tomorrow.
US 10-year Treasury yields were little changed at 4.5789 per cent, finding a floor after dipping as low as 4.484 per cent on Friday for the first time since September 26. They reached a 16-year high of 5.021 per cent last month.
The dollar index, which measures the currency against six major peers, was largely flat at 105.55, above the more than six-week low of 104.84 reached on Monday, but well back from the high at the start of this month at 107.11.
“The markets are repositioning for a moderation in US growth,” pushing down long-term yields and the dollar, said Kyle Rodda, a senior markets analyst at Capital.com.
“The drop in oil prices is delivering a similar signal,” he added. “The sell-off is coming on demand fears: There’s a lot of fear about China’s recovery in that, but also that after exceptional resilience, the US economy is slowing.”
Brent crude futures dropped 25 cents to US$81.36 (RM380.15) a barrel today, while US crude futures fell 35 cents to US$77.02 a barrel. Both declined to the lowest since July 24 in early Asia trade.
Declines in commodity shares amid lower energy prices were offset by a climb in growth stocks, amid expectations for lower borrowing costs.
A case in point was Japan’s tech-heavy Nikkei 225, which rose 0.13 per cent while the broader Topix sank 0.66 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3 per cent, aided by gains for Chinese markets after some bullish comments from the People’s Bank of China governor.
Hong Kong’s Hang Seng rose 0.22 per cent, while an index of mainland blue chips added 0.1 per cent. — Reuters
