Written by Ankur Banerjee
SINGAPORE (Reuters) - Asian stocks fell on Thursday, bond yields rose and the dollar neared a two-year high after the U.S. Federal Reserve warned it would ease the pace of interest rate cuts next year. Japanese policy decisions.
The Fed cut interest rates in line with expectations on Wednesday, but Chairman Jerome Powell made clear the need for caution, sending U.S. stocks sharply lower, Treasury yields rising and traders betting on a rate cut next year. reduced.
The Dow Jones Industrial Average fell more than 1,000 points. (.N)
Asian stocks followed Wall Street's lead, with MSCI's broadest index of Asia-Pacific shares outside Japan down 1%. Japan's Nikkei fell 1.8%, while Australian shares fell more than 2%.
"I think we're in a good position, but this is a new phase here and I think we're going to be cautious about making further cuts," Powell said at a news conference.
The U.S. central bank now plans to cut interest rates by a quarter of a percentage point to just two percentage points by the end of 2025, half a percentage point less than officials had expected as of September next year.
"While the Fed has been more hawkish than we expected, today's change in policy guidance directly affects our view of the Fed taking a longer pause in early 2025," said Prashant Newnaha, chief Asia Pacific policy strategist at TD Securities.
"The most meaningful surprises centered on inflation expectations, which will be higher over the longer term."
A shift in expectations for a Fed rate cut pushed the dollar index, which measures the U.S. currency against six rivals, to its highest level since November 2022 on Wednesday. It last traded at 108.15 on Thursday. (FRX/)
Despite signs of a slowing economy, sterling was steady at $1.25835 ahead of the Bank of England's policy decision later in the day, when the central bank is expected to keep interest rates on hold.
The U.S. 10-year note yield hit a seven-month high of 4.524% on Wednesday and was at 4.51% in early Asia.
IG market analyst Tony Sycamore said the outcome of the Fed meeting should not have surprised investors who had been watching recent US inflation and activity data.
"However, it was a catalyst to wash away some of the speculative excesses that flowed into risk assets such as stocks and bitcoin after the US election," he said.
Bitcoin fell 5% to $100,340 on Wednesday after Powell said the U.S. central bank was unwilling to participate in government efforts to stockpile large amounts of bitcoin.
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