Asian shares mixed on Tuesday after Federal Reserves Chair Jerome Powell struck a more hawkish tone in his campaign against inflation.
The HSI, KOSPI and TOPIX inched up by 1.09%, 0.70% and 1.24% respectively.
U.S. Treasuries extended losses after short-date yields posted one for the biggest daily climbs of the past decade. The gap between five-year and 30-year U.S. yields is around the narrowest since 2007, signaling an economic slowdown as the Fed hikes borrowing costs.
Jerome Powell in this speech said, if needed Fed is prepared to raise interest rates by half percentage points at the next policy meeting. Earlier Fed raised interest rate by a quarter point last week and signaled six more such this year.
“If Powell is reinforcing that they are going to address inflation — that they’ve made mistakes, that their expectations of inflation were incorrect — just admitting that, and saying that we’re ready to do everything it takes, is definitely reassuring for equity investors,” Erin Gibbs, chief investment officer at Main Street Asset Management, said on Bloomberg Television, as reported by Bloomberg.
Derivative traders Monday priced in about 7.5 quarter-point rate hikes at the remaining six Fed meetings this year, effectively making provision for more than one half-point rise.
“For the long term, 2.3% on the 10-year is not such a high figure at all,” Linda Duessel, senior equity strategist at Federated Hermes Inc., said on Bloomberg Television, as reported by Bloomberg.
“What spooks the market is when you have very quick moves, such as what we’re having now.”
China’s cabinet pledged stronger monetary-policy support while cautioning against flooding the market with liquidity, state broadcaster CCTV reported Monday. Authorities vowed to avoid measures that can hurt market sentiment.
Oil extended a rally, with Russia’s war in Ukraine nearing the one-month mark and no conclusion in sight. There are signs the European Union may be edging closer to a ban on Russian crude imports to punish Moscow for its invasion.
The U.S. WTI inched up by 1.94% to $114.30 per barrel while Brent inched up by 2.36% to $118.25 per barrel.
