Asian stocks tread water as investors await Fed’s rate decision

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Reports of planned state support for China’s property sector lifted a Hong Kong index of mainland developers

Asia’s stock markets were steady but fragile on Thursday, a day after their biggest drawdown in three months as investors weighed the risk of the Federal Reserve announcing a 100-basis-point interest rate hike next week to tackle sticky inflation.

“The best metaphor is that the Fed is not only driving the economy using a rear-view mirror but is now being forced to press the ‘rate rise’ accelerator just as bond markets are discounting an overtightening.” Two-year yields, which track near-term rate expectations, were steady at 3.7860%, up 22 basis points this week for a seventh straight weekly gain. The benchmark 10-year yield was at 3.4062%.

In currency markets, the US inflation shock and expectation of rate hikes in response has sent the greenback up to re-test recent multi-decade highs. Thursday moves were modest with the euro steady at $0.9978 and the Aussie taking a small lift to $0.6754 after some mixed employment data. “But what’s clear is that the market is wary of the level, and has tried to test the level a few times, which seems to suggest that if it breaks, it may overshoot quite rapidly.”

 

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Market Watcher: Inflation, the bearer of bad news[LISTEN] FNB’s Chantal Marx discusses US CPI data hurting markets, pricing pressure in the US economy, the impact of further hike rates, and where there is still opportunity for investors, on SAfm Market Update with Fifi Peters. Download the podcast
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