Asian Stocks Edge Higher as Investors Await Powell:
- Japan’s nominal wage jump raises bets BOJ will adjust stimulus
- Fed Chair Powell due to speak Tuesday, RBA decision in focus
US and European equity futures and Asian stocks made small gains as investors awaited commentary from Federal Reserve Chair Jerome Powell later Tuesday.
A gauge of the region’s shares rose about 0.6%, trimming losses from the biggest two-day drop in four months, as investors weigh the chances of the Fed keeping a firm grip on monetary policy.
Some of the strongest gains Tuesday were in tech stocks listed in Hong Kong — providing a sharp contrast to the decline in US equities Monday when the S&P 500 and the tech-heavy Nasdaq 100 both finished lower as bond yields rose. Baidu Inc. surged as much as 13% after affirming it will launch a ChatGPT-like bot in March.
Treasuries clawed back some of the two-day rout that was sparked by traders ramping up bets on future Fed tightening. The recent move has taken the shine off the best start to a year for cross-asset returns since 1987.
Australian bonds fell following the moves in the US market and before an interest rate decision from the central bank, which is forecast to hike by 25 basis points.
Investors are weighing whether Powell may emphasize that optimism for rate cuts later in 2023 is probably misplaced. Atlanta Fed President Raphael Bostic said Monday the strong jobs data on Friday raises the possibility that the central bank will need to increase interest rates to a higher peak than policymakers had previously expected.
“Fed Chair Powell remains a big wild card every time he speaks,” said Chris Senyek at Wolfe Research. “Investors will be looking to see if he ‘walks back’ his very dovish tone from last Wednesday, particularly with respect to financial conditions and the US ‘disinflationary process.’ We still believe that the Fed will be ‘higher for longer’.”
The yen held most of its losses from Monday after broad gains in the dollar sent a gauge of the greenback up for a third day. Japan unexpectedly reported nominal wages jump in December by the biggest margin in nearly 26 years, stoking market bets that the central bank will adjust or back away from its stimulus program under a new governor.
There also seems to be no quick fix to the stock rout roiling Gautam Adani’s indebted conglomerate. The meltdown since US short-seller Hindenburg Research made fraud allegations against the ports-to-power group in a Jan. 24 report has wiped out $117 billion, or almost half of the market value of its companies. Adani has repeatedly denied the claims.
The air of caution in global markets is being reinforced by geopolitical concerns. The US is preparing to impose a 200% tariff on Russian-made aluminum, while the US started to recover some parts from the Chinese balloon that a fighter jet shot down off the coast of South Carolina. Biden administration officials said the US was still trying to figure out how much senior leaders in Beijing knew about the alleged spy mission.
Elsewhere, oil extended gains after Saudi Arabia unexpectedly raised its crude prices to Asia, signaling confidence in the demand outlook. Gold edged up.