- Equities reverse course to gain in Japan; China fluctuates
- Australian dollar, bond yields advance after RBA rate hike
Equities fell in Australia, reversed course to rise in Japan and fluctuated in mainland China and Hong Kong. US futures made small gains following S&P 500’s third day of declines.
Treasury yields were steady in Asian trading after surging Monday as the services reading bolstered the case for the Federal Reserve to deliver higher interest rates. The dollar was little changed.
Australia’s central bank raised its key interest rate by 25 basis points as expected while giving itself flexibility for future decisions. The yield on Australia’s three-year government bond rose and the Australian dollar extended its advance slightly.
The yen erased gains after the Bank of Japan reiterated its dovish policy stance. The offshore yuan remained below 7 to the greenback.
Swaps showed an increase in expectations for where the Fed terminal rate will be, with the market indicating a peak above 5% in the middle of 2023. The current benchmark sits in a range between 3.75% and 4%.
Meanwhile, Beijing announced it will scrap Covid testing requirements for most public venues in what is seen as an accelerated move toward the exit of Covid zero policy. But the possibility of new tariffs on Chinese steel and aluminum by the US and European Union may weigh on sentiment. Oil was up for the first time in three days on optimism that China’s reopening will buoy demand. Gold climbed.