MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.2% but was still 4.3% lower for the week, the biggest weekly loss in over two years
The U.S. dollar was poised for big weekly gains on Friday, hovering near one-year highs as a hawkish turn from the Fed chief sent short-term Treasury yields higher, leaving Wall Street and European futures in the red.
Asian shares looked to end a volatile week on a steadier note as Chinese data retail sales beat forecasts in October in a welcome sign for consumer spending, although other indicators missed.
Overnight, Fed Chair Jerome Powell said there was no need to rush rate cuts with the economy still growing, the job market solid and inflation still above the 2% target, tempering expectations for a rate cut next month.
Fed fund futures for next year plummeted with December down 7 ticks and imply just 71 bps of rate cuts by end-2025. A rate cut next month is no longer a high probability event, with just 61% priced in, down from 82.5% in the prior session.
That lifted the dollar across the board, particularly against the euro as expectations for more aggressive policy easing in Europe further undermined the single currency already trading at one-year lows.
Goldman Sachs now sees a greater risk that the Federal Reserve could slow the pace of easing sooner, possibly as soon as the December or January meetings, while JPMorgan still tips the Fed to cut in December though they expect the central bank could dial down the easing pace in January.
After the sugar hit of Trump’s election and its subsequent impacts on expectations for company profits, the market’s enthusiasm is being watered-down by greater interest rate uncertainty, especially going into next year, according to Kyle Rodda, a senior analyst at Capital.com.
On Friday, Nasdaq futures declined 0.4% while S&P 500 futures stumbled 0.3%. EUROSTOXX 50 futures skidded 0.5%.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.2% but was still 4.3% lower for the week, the biggest weekly loss in over two years.
A regional healthcare index underperformed with a decline of 1%, after U.S. President-elect Donald Trump nominated Robert F. Kennedy Jr., a prominent vaccine sceptic, to lead the top US health agency.
Tokyo’s Nikkei, however, added 0.7% driven by a pull back in the yen, which boosted the outlook for Japanese exporters. Still, it was 1.7% lower for the week.
