Asia shares struggle, US dollar soars on lowered Fed rate cut bets

Malay Mail

a day ago

TOKYO, July 16 — Asian stock markets were under pressure today while the dollar climbed to its firmest against the yen since early April, after US inflation suggested tariffs are pushing prices up, dampening expectations for Federal Reserve policy easing.
US Treasury yields ticked to the highest in more than a month, lifting the dollar against the yen in particular.
However, tech shares remained resilient following a 4 per cent rally in artificial-intelligence darling Nvidia overnight.
Brent crude continued to hover around US$69 per barrel.
Data yesterday showed US consumer prices rose 0.3 per cent in June, in line with forecasts, but the largest gain since January. Economists attributed the rise in prices across goods such as coffee and home furnishings to the Trump administration's escalating import tariffs.
The Fed has been keeping interest rates steady as it has waited for indications of the inflationary impact from tariffs, which Chair Jerome Powell had said he expected in the summer.
'We know the revealed preference of Fed Chair Powell, along with a few of his colleagues, is to wait for these tariff impacts to come through, and those in that camp are seeing that view bolstered by this data,' Taylor Nugent, senior economist at National Australia Bank, said in a podcast.
As a result, markets saw 'a fairly significant trimming of Fed expectations' for rate cuts, Nugent said.
Traders currently price in 43 basis points of rate reductions for the rest of this year, with 56.5 per cent odds of a quarter-point cut in September.
Investors will now carefully monitor producer price data due later today, looking for signs of whether inflationary pressures are also building on the factory floor.
Australia's equity benchmark South Korea's Kospi each lost around 0.6 per cent as of 0127 GMT. Mainland Chinese blue chips slipped 0.1 per cent.
Japan's tech- and exporter-heavy Nikkei was flat after alternating between small gains and losses, supported by both Nvidia's fortunes and the weak yen.
Taiwan's benchmark added 0.5 per cent and Hong Kong's Hang Seng jumped 0.8 per cent, adding to yesterday's 1.6 per cent tech-driven rally.
US S&P 500 futures eased 0.2 per cent, after a 0.4 per cent decline for the cash index overnight.
Beyond the Fed and US President Donald Trump's tariffs, the earnings season is another focal point for investors.
Results from JPMorgan Chase and Citigroup beat expectations, but were met with a mixed market response. Wells Fargo cut its 2025 net interest income guidance even as it beat second-quarter profit expectations.
Bank earnings due today include Goldman Sachs, Morgan Stanley and Bank of America.
US 10-year Treasury yields rose as high as 4.495 per cent today, the highest since June 11.
The dollar stuck close to a multi-week high against major peers. The dollar index was little changed at 98.545 after rising as high as 98.699 yesterday for the first time since June 23.
The US currency was steady at ¥148.785, and earlier rose to 149.04 for the first time since April 3, in the aftermath of Trump's 'Liberation Day' tariff announcement.
The euro edged up 0.1 per cent to US$1.1612, trying to pull away from yesterday's three-week low of US$1.1593.
Cryptocurrency bitcoin added about 1 per cent to US$117,696, as it stabilised following its 6 per cent pullback earlier this week from Monday's all-time high at US$123,153.22.
Gold added 0.3 per cent to around US$3,332.
Brent crude futures fell 5 cents to US$69.16 a barrel, while US West Texas Intermediate crude futures declined 9 cents to US$66.89 a barrel. Both contracts settled more than US$1 lower in the previous session. — Reuters