Asian Stocks to Slip Ahead of Fed, Oil Steadies: Markets Wrap

0y0q4naej9i}cyfv}78qfy(v_media_dl_1.png Nymex

Article content

(Bloomberg) — Stocks in Asia looked set to snap a three-day winning streak, tracking declines on Wall Street as investors rotated out of technology shares and positioned for the first Federal Reserve policy decision under Chairman Kevin Warsh.

Article content

Equity-index futures for Japan, South Korea and Australia pointed to losses at the open, while contracts for Hong Kong edged higher. A pullback in chipmakers after a sharp rally weighed on US equities, dragging the S&P 500 lower and sending the Nasdaq 100 down almost 2%. Elsewhere, SpaceX extended its post-IPO surge to nearly 50%, overtaking Amazon.com Inc. to become the world’s fifth-largest company by market value.

Article content

Article content

Article content

West Texas Intermediate crude steadied early Wednesday after tumbling about 6% in the previous session to around $76 a barrel. With the US and Iran preparing to formally sign an interim peace agreement on Friday, traders are looking for clues from policymakers on the impacts of the war.

Article content

Article content

With a well-flagged hike from the Bank of Japan seen as an exception, most developed-world central banks including the Fed are expected to make no changes this week. Recent declines in crude oil prices have helped ease concerns that energy costs may reignite inflation, shifting investors’ focus back to the path of interest rates.

Article content

“For markets, a ‘higher-for-longer’ rate backdrop, rather than a renewed tightening cycle, can remain supportive of valuations, in our view, particularly if it reflects resilient economic growth alongside gradually moderating inflation pressures,” said Mona Mahajan at Edward Jones.

Article content

The US and Iran are preparing to formally sign an interim peace deal that’s left both sides claiming victory, with details of the accord still emerging and leaving many European governments, energy investors and shipping companies with reservations about how fast the strait can be returned to pre-war conditions.

Article content

Article content

While benchmark oil prices reached their lowest levels since early March, Treasury yields remained above Monday’s lows, even after a 20-year bond auction. On the day, they were down by two to five basis points across maturities, with those on 30-year bonds leading the declines.

Article content

“In the short run, oil prices are down a lot, but the market is trying to decide what’s more important — the short term or the unclear impact on inflation in the long run,” said David Robin, an interest-rate strategist at TJM Institutional Services LLC. “The absence of an answer is limiting the impact of oil prices on the rates market.”

Article content

Attention is now shifting toward Warsh’s first meeting as chairman of the Fed. Bloomberg Economics sees a shift in how the central bank communicates with markets as Warsh is unlikely to submit his own “dot” to the closely scrutinized dot plot, breaking with precedent under Jerome Powell, Janet Yellen and Ben Bernanke.

Article content

The meeting is unlikely to produce a rate move, but investors will be looking for the first substantive clues on how Warsh plans to navigate the inflation outlook. With falling oil prices offering some relief while broader price pressures remain uncertain, traders are watching for any signal on whether the Fed’s focus is shifting toward patience or renewed vigilance.