By Tom Westbrook
SINGAPORE (Reuters) – Asian shares fell on Wednesday as the rapid recovery in global equity markets took a breather. Bond yields and the dollar fell ahead of U.S. economic data and speeches by politicians expected to push for interest rate cuts.
The S&P 500 ended eight sessions of gains and lost 0.2 percent overnight. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 percent. Futures for the U.S. and Europe each rose about 0.2 percent.
Hong Kong’s Hang Seng fell 1% and JD.com lost 10% as its largest shareholder Walmart sought to sell its large stake.
Japan’s Nikkei fell 1% at the start of trading as the recovery from the early August slump encountered resistance at around 38,000 points, but recovered to trade 0.3% lower in the afternoon.
“The sell-off itself has largely corrected itself, and fears of recession have again given way to hopes of a soft landing,” said Moh Siong Sim, an analyst at Bank of Singapore.
“But now we are back to square one and … the market needs validation before it can relax, and that validation has to come from data.”
Preliminary revisions to US labor market data are due to be released later on Wednesday. A significant downward revision is expected, which would support a cut in interest rates. The Federal Reserve’s minutes are also expected to reinforce a dovish stance.
On Thursday, the purchasing managers’ indices surveys will be released in the US and worldwide.
The falling dollar has pushed gold prices to record highs and brought the yen back to 145.67 against the greenback, up 1.6 percent this week and around 11 percent above the 38-year low hit last month.
The euro is up nearly 3% so far in August and is at its highest since early December at $1.1132 in Asian trading, testing key chart levels. (FRX/)
Interest rate futures have priced in a 25 basis point (bp) rate cut next month, with a 1/3 chance of a 50 bp cut. Cuts of almost 100 bp are priced in this year, and another 100 bp next year.
“The current weaker trend in the greenback is probably mainly due to expectations that a looser monetary policy from the Fed is getting closer,” Rabobank strategist Jane Foley wrote in a note.
“This raises the question of whether the Fed’s hopes for a rate cut are still exaggerated and whether there is a risk that the euro-dollar ratio will fall below $1.10 again in the short term.”
The chairman of the US Federal Reserve, Jerome Powell, is scheduled to give a speech at the Jackson Hole Symposium in Wyoming on Friday. The Australian and New Zealand dollars have recently recorded significant gains. The Aussie is trading at USD 0.6747 and the Kiwi at USD 0.6157. (AUD/)
This sentiment supported bond markets, with the 10-year US Treasury yield falling slightly to 3.81%, while the 2-year Treasury yield remained at 3.99%.
Commodity prices stabilized, with Brent crude futures at $77.12 a barrel and the price of Dalian iron ore finding a bottom after Bloomberg reported that China would allow local governments to buy up unsold homes as part of its latest measure to support the property market.
China is the world’s largest consumer of steel and markets are sensitive to signs that the construction industry is picking up again. In Australia, shares of major mining companies remained stable.
The price of gold was $2,516 per ounce, just below the record level reached on Tuesday.
In emerging markets, the central banks of Thailand and Indonesia meet on Wednesday to set interest rates, although neither bank is expected to begin cutting rates before the Federal Reserve.
(Edited by Shri Navaratnam and Kim Coghill)
