Asian stock market rally ebbs as Treasuries rise; dollar firms- Markets Wrap

Asian stock market rally ebbs as Treasuries rise; dollar firms: Markets Wrap

A rally in stocks cooled in Asia on Wednesday while Treasuries edged up as investors weighed the latest China figures as well as hawkish comments from Federal Reserve Chair Jerome Powell.

Shares rose in Japan but fell in China and Hong Kong. MSCI Inc.’s Asia-Pacific stock index remained higher for a fourth day, the longest streak since February. US futures dipped after the S&P 500 added 2% in a risk rebound.

Treasuries pared a slide from Tuesday, leaving the US 10-year yield at 2.97%. Bonds were pressured overnight after Powell said the Fed “won’t hesitate” to tighten policy beyond neutral to curb inflation. A gauge of the dollar steadied.

Crude oil was trading around $113 a barrel. Cryptocurrencies extended a period of relative calm, with Bitcoin hovering around $30,300.

Investor sentiment improved a little on robust US retail sales and factory output data, as well as stronger-than-expected euro-area expansion. The worry is that tougher times lie ahead as monetary settings tighten, Russia continues the war in Ukraine and China grapples with Covid.

“We’ll have this kind of volatility as people jump in and look at opportunities to buy as markets decline,” Shana Sissel, director of investments at Cope Corrales, said on Bloomberg Television, referring to the Wall Street bounce. The Fed is going to struggle to achieve a soft economic landing, she added.

Powell said that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. The remarks at a Wall Street Journal live event were some of his most hawkish so far.

Chicago Fed President Charles Evans said he expects the Fed to slow the pace of rate increases to 25 basis-point increments later this year. He expects the Fed to have completed any 50 basis-point hikes before December.

“This is one of the most challenging markets I have been in in my career,” Henry Peabody, fixed income portfolio manager at MFS Investment Management, said on Bloomberg Television. “I suspect at a certain point of time we’re going to have the liquidity of the markets challenged. They really haven’t been thus far.”

Elsewhere, the Biden administration is poised to fully block Russia’s ability to pay US bondholders after a deadline expires next week, a move that could bring Moscow closer to the brink of default.