Asia stocks crumble as hopes fade for imminent Fed rate cut

SYDNEY – Asian markets joined a global sell-off on Nov 14 as hawkish comments from Federal Reserve officials doused hopes for a US rate cut in December, while a still messy US data calendar added to the angst, hitting bonds, the US dollar and even gold.

Japan’s Nikkei tumbled 1.8 per cent on Nov 14, while Australia’s resources-heavy shares slid 1.5 per cent and South Korea plunged 2.3 per cent. The Straits Times Index tumbled as much as 0.9 per cent before recovering some ground. It was down 0.4 per cent at 10.17am.

Overnight, Wall Street tumbled with steep losses in Nvidia and other artificial intelligence heavyweights on valuation concerns, while Treasuries retreated as investors scaled back expectations of a rate cut from the Fed in December to

just 47 per cent, down from 67 per cent earlier in the week

.

The US dollar failed to get a lift on higher yields, losing ground to the likes of the yen and Swiss franc.

“The drawdown seen across assets was pronounced, and looking across the suite of investible markets, there were few places to hide,” said Mr Chris Weston, head of research at Pepperstone.

“With the US government open for business, traders now await the Bureau of Labour Statistics schedule for key economic data... So far, positioning has been set largely on Tier 2 data and that will need to be reconciled against the headline data that truly drives the Fed’s decision-making process.”

The White House, however, dashed hopes for a clearer view of the US economy any time soon, saying that the US unemployment rate for October may never be available. Adding to the downbeat mood and pointing to worries about high inflation, a growing number of Fed officials overnight signalled caution about further rate cuts.

Mr Alberto Musalem, who runs the St Louis Fed Bank, said there was limited room to ease further without becoming overly accommodative, while Cleveland Fed president Beth Hammack said interest rate policy should remain restrictive to put downward pressure on inflation.

Minneapolis Fed president Neel Kashkari told Bloomberg that he opposed a rate cut in October and is on the fence about December.

Treasuries fell overnight as investors pared back bets for a Fed cut in December. Two-year Treasury yields held at 3.597 per cent, having risen three basis points overnight, while the 10-year yield rose one basis point to 4.125 per cent after gaining three basis points overnight.

The rise in yields, however, failed to support the US dollar, which was down 0.2 per cent against its major peers overnight and was at 99.254, close to the lowest level in two weeks.

The yen got some much-needed respite and last traded at 154.7 per dollar, just a touch above a nine-month low of 155.05 per dollar. The Swiss franc jumped 0.6 per cent on the dollar. The British pound, however, lost 0.3 per cent to US$1.3153 on Nov 14 after the Financial Times reported that Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves have ditched their manifesto-busting plan to increase income tax rates.

Spot gold prices rose 0.3 per cent to US$4,183 an ounce, having lost 0.6 per cent overnight to snap a four-day winning streak. It remained well off its record top of US$4,381. REUTERS