Asian stocks slide as hawkish Powell comments weigh
economictimes.indiatimes.comAsian stocks fell to their lowest in a week on Friday, while the dollar was firm as elevated Treasury yields weighed on sentiment after hawkish comments from U.S. Fed Chair Jerome Powell extinguished expectations of a peak in interest rates.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1% to a one-week low of 486.39, while Japan's Nikkei was 0.50% lower.
U.S. Federal Reserve officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation.
The Fed is «committed to… monetary policy that is sufficiently restrictive to bring inflation down to 2% over time,» Powell said at an International Monetary Fund event.
«We are not confident that we have achieved such a stance.»
Powell's comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar. [US/]
«There is no point in corralling the market into expecting cuts until shortly before they look necessary,» said Rob Carnell, Asia-Pacific head of research at ING.
Investors have been looking for signs of U.S.
interest rates peaking after the Fed held rates steady last week, a move that bolstered speculation that the rate hiking cycle was over, leading to a short-lived rally in risky assets.
Carnell said the Fed needs to keep rates and bond yields reasonably high to achieve the tighter financial conditions that will bring about lower inflation and enable the Fed to ultimately cut rates.
«That rhetoric has to continue, 'we're not definitely finished, there's still a chance of more'… (you) do that right up until the day before you cut,» he said.
