HONG KONG- Stock and bond markets attempted to steady on Tuesday, as investors turned their focus to this week’s US labor market report, to gauge if interest rate hikes that have been priced in around the world are justified.
By mid-morning, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 percent, while Japan’s Nikkei stock index .N225 rose nearly 1 percent, in part helped by a fresh round of weakness in the Japanese yen.
Wall Street indexes fell on Monday, but the pace of selling was reduced and US stock futures were steady in Asia.
Besides interest rates, the health of China’s economy is also at the forefront of investor concerns. China’s benchmark Shanghai Composite Index lost 0.4 percent in early trade.
Hong Kong’s Hang Seng index .HIS fell 1.8 percent as investors start to walk back their enthusiasm about an agreement struck between China and the United States for access to Chinese companies audit papers.
At the Jackson Hole conference last week, Federal Reserve Chair Jerome Powell and European Central Bank speakers struck a hawkish tone, driving selling of bonds and equities as traders jacked up near-term interest rate expectations.
“The markets focus for the next couple of weeks at least, will be the likely Fed action,” said ManishiRaychaudhuri, head of APAC equity research at BNP Paribas.
“Earlier, there was talk of a pivot of a possible cutting of interest rates by the Fed, maybe in 2023 second half or so, but that is now sort of falling by the wayside,” he said.
“Higher for longer (interest rate) is possibly the kind of narrative that’s building up,” he said.
Futures markets have odds of better than two-thirds that the ECB raises rates by 75 basis points in September, and see about a 70 percent chance that the Fed does likewise. — Reuters
