Powell’s inflation remarks drive Asian stocks down

Asian stocks were mostly weaker after the U.S. Treasuries rout spread to the region after Jay Powell’s comments failed to stem inflation fears in the United States.

Hong Kong’s Hang Seng fell 0.3% after the remarks by the Chairman of the US Federal Reserve while Japan’s Topix rose 0.1% and the S & P / ASX 200 fell 0.8% in Australia.

The Chinese CSI 300 index of shares listed in Shanghai and Shenzhen fell 2% before falling 0.5% at the end of the morning session, after Beijing set a target “above 6%” for the economy. growth in 2021.

Premier Li Keqiang greeted China is recovering from an “extraordinary” year and said the government wants to create at least 11 million urban jobs at a meeting of the National People’s Congress, the annual meeting of the country’s parliament.

“A target of more than 6% will allow all of us to devote all our energy to promoting high-quality reform, innovation and development,” Li said, adding that Beijing “will support economic growth. healthy ”by launching the five new ones. annual plan.

Analysts were less optimistic about China’s economic outlook, however, pointing to the much lower growth target compared to recent years.

“There is, in fact, not much of a surprise in the government’s work report, except for the extremely low GDP target,” said Iris Pang, chief economist for Greater China at ING, who has estimated that growth would be 7% this year. “It makes me uncomfortable because I don’t know exactly what the government wants to tell us on the road to recovery it expects.”

The mixed performance in Asia-Pacific stocks came after Powell failed to alleviate fears that the US central bank was reacting too slowly to rising inflation expectations and long-term treasury yields, which rise as bond prices fall.

Powell said Thursday he expected the Fed to be “patient” in withdrawing support for the US economic recovery as unemployment remained well above target levels. But he added that it would take more disorder in the markets and tighter financial conditions in general to spur further central bank intervention.

“With regard to the bond market, I would be concerned about disorderly conditions in the markets or a persistent tightening of financial conditions which threatens the achievement of our objectives,” said Powell.

Yields on 10-year U.S. Treasuries jumped 0.07 percentage points to 1.55% following Powell’s remarks. In Asian trading on Friday they climbed 0.02 percentage point to 1.57%. The 10-year Australian Treasury yield rose 0.07 percentage point to 1.83%

“Based on our growth forecast, long-term rates will likely rise over the next few quarters – but more slowly,” said Eric Winograd, senior economist at AllianceBernstein. “And we think the Fed is willing to push the other way if rates go up too far, too fast.”

The S&P 500, which closed Thursday’s session 1.3% lower, was pushed by the futures markets to fall a further 0.1% when trading begins on Wall Street. The FTSE 100 was expected to fall 0.8%.

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