Asian stocks fall, dollar rises as rate cut wagers waver
Asian stocks fell on Friday, while the dollar advanced as strong U.S. economic data bolstered the prospect of interest rates staying higher for longer and the Federal Reserve taking its time in cutting rates, keeping investors away from risky assets.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5% and was on course for a 1% weekly decline, snapping its four-week winning streak. Japan's Nikkei fell 1.45%.
China stocks were little changed in early trading, with the blue chip stocks 0.05% lower as China's military started its second day of war games around Taiwan on Friday. Hong Kong's Hang Seng Index was 0.33% lower.
Data on Thursday showed U.S. jobless claims dropped while S&P Global's Flash PMI survey showed business activity expanded faster than economists forecast in May.
The robust economic data along with hawkish minutes from the Fed's last meeting earlier in the week has led traders to dial back their bets on rate cuts this year, with markets now pricing in just 35 basis points of easing in 2024, versus expectations of 150 bps of cuts at the start of the year.
Markets are now fully pricing in a rate cut in December with a cut in September now a coin toss, CME FedWatch tool showed.
«This week's data reaffirms the Fed simply does not have the capacity to provide policy accommodation,» said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities.
«The market and the Fed will just have to wait until there are labour market cracks to begin easing and right now there is
