Global markets have been suffocated by a nervous silence, as the Federal Reserve’s hawkish voice and unexpectedly strong US data has forced a difficult recalibration in interest rate expectations.
The wave of fear has swept across Asia. It ended a winning streak that lasted six days in India, and it’s tingling the market as they wait for Jerome Powell to speak.
Asian stocks traded in a narrow and anxious range. Futures for Tokyo, Hong Kong and Singapore all pointed to declines following a selloff triggered by the tech sector that sent S&P500 to its fifth consecutive day of losses.
The tech industry was shaken by a sudden earthquake as the shares of Nvidia Corp., a bellwether in the sector, fell nearly 1,9% during Asian trading following a report that they had ordered suppliers to stop production of an important AI chip.
The move by the US-based giant, while Chinese stocks rose on the news of the US, underscored the market’s risk-off, jittery mood.
The Great Recalibration – a doveish dream is fading
This global fear is the result of a rapid and dramatic repricing in risk. A Fed rate cut in September was a virtual certainty just a week before.
Money markets today have reduced the likelihood of a reduction from 90% to 70% after Fed officials made a series of hawkish remarks and the US Manufacturing Report showed the highest growth rate since 2022.
Now the market has to face a truth it was hoping to ignore.
Bloomberg quotes Rajeev de Mello, Chief Investment Officer at Gama Asset Management as saying: “Markets appear to be overly optimistic for a shift towards a more dovish tone.”
Expect the Fed to continue its cautious and data-driven approach.
This week, the cautious attitude was on display. Beth Hammack, the Cleveland Fed’s chief economist, said that she would not support an easing of policy in the future. Raphael Bostic from Atlanta said there will only be one rate reduction this year.
The dovish market dreams are being resisted by a chorus of voices.
Bloomberg reported that Bret Kenwell is a US.investment analysts at eToro. “The Fed has a difficult situation, as it faces pressure to reduce interest rates due to rising inflation and sluggish labor markets.”
Dalal Street: A Reality Check
The bullish spirit on Dalal Street has been broken by the global caution wave.
The Indian stock market began in a negative mood after a six-day spectacular rally which took the Nifty50 above 25,000.
The BSE Sensex fell 148 points (0.18%) to 81.852.5 while the NSE Nifty50 dropped 50 points (0.20%) to 25.032, a sign of global jitters.
Jackson Hole in Wyoming is the focal point of attention for all financial markets. In recent years, investors know Powell used the same stage in order to create market-moving stories.
The market is waiting to hear if the hawkish message will send it into a tailspin.
Bloomberg reported that “Investors appear to have penciled in a more dovish stance from Powell”, Alex Loo is a macro-strategist at Toronto Dominion Bank.
We expect a market response that is asymmetric to either a hawkish or neutral position… and this could fuel dollar gains.
The post Asian Markets Open: Nikkei Futures Slide, Sensex Down 0.18% As Powell’s Speech Looms could be updated as new information becomes available
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