Stocks slip as focus falls back on Fed

SINGAPORE : Stocks eased on Wednesday, while the dollar was under a little pressure, as traders shifted focus from U.S. banking stress to expectations for an imminent peak in the Federal Reserve's interest rate cycle.

"So far the major banks that have reported have largely helped to settle market nerves," said Khoon Goh, head of Asia research at ANZ in Singapore."With those stresses easing away, markets are now back to focusing on the Fed." Markets are pricing an 86 per cent chance the Fed raises rates by 25 basis points at the May meeting, and that wasn't swayed terribly much by conflicting outlooks from two non-voting Fed officials on Tuesday.

The inversion between three-month Treasury yields and 10-year yields, at more than 160 bps, is the deepest since 1981 when the Fed funds rate was climbing down from a mid-year peak of 19 per cent.The prospect of peak rates has been applying downward pressure on the U.S. dollar. Better-than-expected growth data in China and hot British wages added to that earlier in the week.

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