Asian stocks follow Wall Street’s fall as Alphabet plunges

Asian stocks followed Wall Street lower as a number of Federal Reserve speakers echo Chairman Jerome Powell in saying interest rates should rise, capping risk sentiment, while the dollar hovers near one-month highs.

MSCI’s broadest index of Asia-Pacific stocks outside Japan slid 0.3% in early trading Thursday.

The Japanese Nikkei also fell 0.3%.

Chinese blue chips were down 0.1%, while Hong Kong’s Hang Seng index was down 0.2%, weighed down by a bigger 0.7% fall in tech stocks.

Alphabet Inc shares fell 7.7% on Wednesday after its new AI chatbot Bard provided an incorrect answer in a promotional video, sending the S&P 500 and Nasdaq down more than 1%.

Adding to the cautious mood, Federal Reserve officials said more interest rate hikes were on the cards as the U.S. central bank continued its efforts to control inflation.

However, no one suggested that January’s strong jobs report could lead to more aggressive policy action.

“Now that inflation has peaked and many central banks have started to slow the pace of policy tightening, markets are starting to scour their communications again for evidence of what’s to come,” said Jennifer McKeown, Chief Economist at Capital Economics.

“But despite the strong push for transparency over the past two decades, central banks are struggling to send the right message with conflicting data adding to confusion about the outlook for inflation in a post-pandemic world. “

On Wednesday, New York Fed President John Williams said moving to a federal funds rate of between 5.0% and 5.25% “seems like a very reasonable view of what we’ll need to do this year. in order to obtain the imbalances of supply and demand”. down”.

Governor Christopher Waller said the battle to meet the Fed’s 2% inflation target “could be a long fight.”

But Governor Lisa Cook said big job gains in January with moderate wage growth boosted hopes for a “soft landing”.

US Treasury Secretary Janet Yellen said while inflation remained high, there were encouraging signs that mismatches between supply and demand were easing in many parts of the economy.

The bond market rallied slightly after being caught off guard by January’s hit US jobs report, forcing many to reposition themselves for a higher peak in the fed funds rate.

The two-year Treasury yield, which rises on traders’ expectations of a hike in the federal funds rate, fell two basis points to 4.4375% on Thursday, while the yield on 10-year Treasury bills of benchmark slipped five basis points to 3.6012%.

Futures forecast that the Fed’s target rate will peak at 5.132% in July, about 25 basis points higher than last week, and in December it will have fallen to 4.813%, a jump of about 40 basis points since last week. .

On the currency markets, the movements were rather moderate.

The dollar index held near a one-month high at 103.45 against major peers after last week’s stunning jobs and services data.

In the oil market, Brent crude futures fell 0.2% to US$84.90 (A$122.51) while US West Texas Intermediate (WTI) crude also stabilized by 0.1% to US$78.36 (A$113.07).

Gold was slightly lower.

Spot gold was trading at US$1,872.48 (A$2,701.89) an ounce.