Asian markets gain, investors anxious for U.S. rate hike clues

By Thomson Reuters Aug 24, 2022 | 8:55 PM

By Scott Murdoch

HONG KONG (Reuters) – Asian share markets were broadly positive while the dollar was slightly weaker on Thursday, with investors nervously awaiting the U.S. Federal Reserve’s annual Jackson Hole conference for clues on how sharp future interest rate hikes might be.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3%, after U.S. stocks ended the previous session with mild gains.

Australian shares climbed 0.7%, while Japan’s Nikkei stock index rose 0.52% and China’s CSI300 advanced 0.27%.

The Federal Reserve’s annual monetary policy conference in Jackson Hole, Wyoming is due to start on Friday.

Investors now expect the Fed Funds rate to peak at 3.80% in March 2023, up from 3.62% a fortnight ago, said Tapas Strickland, NAB’s economics director.

“Market moves at least are consistent with the hawkish pushback seen by Fed officials over recent weeks,” he added.

Interest rate futures imply a 60% chance of a 75 basis point Fed hike in September

In early Asian trade, the yield on benchmark 10-year Treasury notes rose to 3.1095% compared with its U.S. close of 3.106% on Wednesday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.4028% compared with a U.S. close of 3.386%.

The yields had also made gains overnight, though that did not stop U.S equity markets rising on Wednesday.

The Dow Jones Industrial Average closed up 0.18%, the S&P 500 gained 0.29% and the Nasdaq Composite advanced 0.41%.

The dollar edged 0.01% lower against the yen to 137.09 . It is still some distance from its high this year of 139.39 in mid-July.

The European single currency was flat during early Asian trade at $0.9968, having lost 2.45% in a month.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was slightly weaker in Asia at 108.51.

“Expectations of a hawkish message from FOMC Chair Powell at Jackson Hole will likely keep upward pressure on the US dollar in the run‑up to his speech on Friday,” Commonwealth Bank analysts wrote in a client note.

“However there is a risk that the speech is deemed not hawkish enough and that we see some retracement in the US dollar.”

U.S. crude ticked up 0.38% to $95.25 a barrel. Brent crude climbed 0.5% to $101.22 per barrel.

Gold was slightly higher, with spot gold trading at $1,752.96 per ounce. [GOL/]

“Gold edged higher as the market weighs the outlook for monetary policy ahead of the annual gather of central bankers at Jackson Hole. The weakening economic activity induced some haven buying in the precious metals, snapping six days of declines,” ANZ analysts wrote in a note to clients.

(Reporting by Scott Murdoch; Editing by Edwina Gibbs)