Aug, 25(Agencies) — Investors Friday braced for the risk of a hawkish tilt from Federal Reserve Chair Jerome Powell at Jackson Hole US yields stabilised below 14-year highs as Asian stocks sold off and the dollar scaled an 11-week peak against major peers.
Crude oil found its footing around one-month lows, but remained on course for a second weekly decline amid a firmer dollar and simmering China-centered worries about global growth.
Meanwhile, the People’s Bank of China set a much stronger-than-anticipated official mid-point for the yuan – something it has done every day this week – to keep a floor under its currency amid the strains from a robust dollar and a sputtering economy.
MSCI’s broadest index of Asia-Pacific shares sagged 1.2%, but remained on track for a 0.5% gain for the week, which would snap a three-week run of declines.
Nerves ahead of Powell’s speech at the Fed’s annual retreat for global central bankers, including the Bank of Japan’s Kazuo Ueda and European Central Bank’s Christine Lagarde, encouraged traders to cash in on the tech-led rally after chip designer Nvidia’s extremely strong financial results following Wednesday’s closing bell.
The tech-centric Nasdaq slumped 2.2% to lead losses of more than 1% across Wall Street’s three major indexes, and futures indicated a flat start at the reopen. Japan’s Nikkei tumbled 2%, with Nvidia supplier Advantest the biggest drag, crashing almost 10%. Hong Kong’s Hang Seng slid 1.1%, with a tech subindex dropping 1.7%. Mainland blue chips drooped 0.4%. “It’s all down to Powell,” said Matt Simpson, a senior market analyst at City Index. “In all likelihood, he’ll peddle the ‘higher for longer’ narrative which is likely already priced in, and that leaves the potential for a ‘buy the rumour, sell the fact’ response,” Simpson said. “However, there is also no real reason for Powell to strike a dovish tone,” he added, “and that could mean an ugly end to the week for stocks, while the dollar shines.”
Fed has been raising rates since March 2022 in an effort to bring down inflation, and investors are looking for clarity on whether more rate increases are ahead and how long the Fed plans to hold rates high.
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