Fed effect: the super dollar remains strong and stocks in Asia close lower

The stocks in Asia They gave way this Thursday in a market marked by low volume due to the holidays, thus trimming some of their gains made earlier in the week, while the dollar rises along with US Treasury bond yields.

As the end of the year approaches, trading volumes decline, and the main focus for investors remains the outlook for interest rates. Federal Reserve. Markets in Hong Kong, Australia and New Zealand are closed for holidays.

Since the chairman of the Federal Reserve, Jerome Powellis preparing markets for fewer rate cuts next year at the central bank’s latest policy meeting, traders are pricing in only about 35 basis points of relief by 2025. This is boosting US Treasury yields and the dollar, with the greenback’s renewed strength acting as a drag on commodities and gold.

The benchmark 10-year yield is rising 2.6 basis points to 4.613% and is up about 40 basis points for the month. ANDThe two-year yield is also strengthening to 4.3489%.

“Given December’s tightening, we think the Fed is skipping the January FOMC meeting and waiting for more data before definitively resuming, or potentially ending, this tapering cycle,” says Tom Porcelli, US chief economist. .US in PGIM Fixed Income. “Given the Fed’s shift toward less accommodation along with a continued focus on both sides of the dual mandate, we believe the market is placing more emphasis on economic events in the new year.”

Currency basket

In currencies, the dollar remains near its highest level in two years against a basket of currencies, at 108.15, and is on track for a monthly gain of more than 2%. The Australian and New Zealand dollars are, meanwhile, among the biggest losers against a dominant dollar, with the Australian dollar falling 0.5% to $0.6238. The kiwi loses 0.58% to $0.5646. The euro lost 0.18% to $1.0399, while the yen remained near its lowest level in five months, standing at 157.35 per dollar.

Japan is slightly increasing scheduled sales of Japanese government bonds (JGBs) to 172.3 trillion yen ($1.1 trillion) in the next fiscal year, the first increase in four years, according to a preliminary plan seen by Reuters. JGB yields barely react to the news, but also rise on the day, following the trend of their US peers.

Closing of 2024 on the rise

MSCI’s broadest index of Asia-Pacific shares outside Japan is down 0.1% but still on track for a weekly gain of about 1.6%, tracking its counterparts on Wall Street earlier in the day. of the week. S&P 500 futures rose 0.8%, while Nasdaq futures advanced 0.3%.

Global stocks look set to close the year with a consecutive annual gain of over 17%, unaffected by rising geopolitical tensions and various global economic and political headwinds. This is mainly due to a second year of big gains for stocks on Wall Street, as artificial intelligence fever and robust economic growth are attracting more global capital into US assets.

“At first glance, markets seem to suggest that exceptional enthusiasm has dominated 2024,” says Vishnu Varathan, head of macroeconomic research for Asia ex-Japan at Mizuho Bank. “It’s worth noting that American bulls, emboldened by American exceptionalism, are not crushing enthusiasm elsewhere.”

Japan’s Nikkei rises 0.95% and is on track to close the year with a gain of 18%. China’s CSI300 large companies index rises 0.08%, while the Shanghai Composite Index advances 0.14%, with both heading for annual gains of more than 10%, driven by increased support from Chinese authorities in the last months to reinforce an affected economy.

Russian companies are starting to use bitcoin and other cryptocurrencies in international payments following legislative changes that allowed this use to counter Western sanctions, Finance Minister Anton Siluanov said on Wednesday.

In commodities, Brent crude oil futures rose 0.08% to $73.64 per barrel, while US crude oil gained 0.1% to $70.17 per barrel. Spot gold rises 0.5% to $2,626.19 an ounce.