Mixed trading on Asian bourses

Tokyo: Asian shares were trading mixed on Wednesday, as expectations resurfaced that US interest rates may stay high for a while. Japan’s benchmark Nikkei-225 dipped 0.5 per cent in afternoon trading to 38,296.69. Australia’s S&P/ASX 200 edged up less than 0.1 per cent to 7,618.50. South Korea’s Kospi was little changed, inching down to 2,608.93. Hong Kong’s Hang Seng slipped 0.2 per cent to 16,219.84, while the Shanghai Composite gained 1.1 per cent to 3,040.72.

The mixed reaction came after Federal Reserve Chairman Jerome Powell said at an event on Tuesday that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence inflation is heading sustainably down to its 2 per cent target. “Appetite for risk-taking remains weak, with Federal Reserve Chair Jerome Powell validating a later timeline for rate cuts, alongside a raft of Fed speakers calling for more patience in easing,” said Yeap Jun Rong, market analyst at IG. On Wall Street, the S&P 500 fell 10.41 points, or 0.2 per cent, to 5,051.41. The index deepened its loss from the day before, when it sank under the pressure brought by a jump in Treasury yields. The Dow Jones Industrial Average rose 63.86, or 0.2 per cent, to 37,798.97, and the Nasdaq composite fell 19.77, or 0.1 per cent, to 15,865.25. But the majority of stocks fell as Treasury yields rose following Powell’s comments. They’ve been climbing rapidly as traders give up hopes that the Fed will deliver many cuts to interest rates this year.

High rates hurt prices for all kinds of investments and raise the risk of a recession in the future. “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said, referring to a string of reports this year that showed inflation remaining hotter than forecast. He suggested if higher inflation does persist, the Fed will hold rates steady “for as long as needed.” But he also acknowledged the Fed could cut rates if the job market unexpectedly weakens.

The yield on the two-year Treasury, which tracks expectations for Fed action, shot as high as 5 per cent immediately after Powell spoke and got back to where it was in November. But yields later pared their gains as the afternoon progressed, and the two-year yield drifted back to 4.98 per cent. That’s still up from 4.91 per cent late Monday. Traders are mostly betting on the Fed delivering just one or two cuts to interest rates this year after coming into 2024 expecting six or more. They’re now also betting on a 12.5 per cent probability that no cuts are coming, up from just 1.2 per cent a month ago, according to data from CME Group.

Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon. The stock of Donald Trump’s social-media company also slumped again. Trump Media and Technology Group fell another 14.2 per cent to follow up on its 18.3 per cent slide from Monday.