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THE GIST
NEWS AND FEATURES
Global Philippines Fine Living
INSIGHTS
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
WEBINARS
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
DOWNLOADS
grocery-2-aa
Economic Updates
Inflation Update: Prices rise even slower in May 
June 5, 2025 DOWNLOAD
Buildings in the Makati Central Business District
Economic Updates
Monthly Recap: BSP to outpace the Fed in rate cuts 
May 29, 2025 DOWNLOAD
economy-ss-9
Economic Updates
Quarterly Economic Growth Release: 5.4% Q12025
May 8, 2025 DOWNLOAD
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Rates & Bonds 3 MIN READ

Can risk appetite resist Fed’s hawkish skip?

June 14, 2023By Reuters
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June 14 (Reuters) – A raft of economic data and a likely medium-term policy easing from China will give Asian markets direction on Thursday, but the main steer will probably come from investors’ reaction to the Federal Reserve’s ‘hawkish skip’ on interest rates.

The Fed paused its policy tightening cycle on Wednesday for the first time but signaled in new economic projections that rates will likely rise by another half of a percentage point by the end of this year as it continues to try to get inflation down.

Short-dated Treasury yields jumped, the US yield curve inversion deepened, and the dollar fell. But Wall Street put up a better fight – although the Dow had its worst day in two weeks, the Nasdaq rebounded and closed up for a fifth day at a new 14-month high, and the S&P 500 basically ended flat.

Will Asian markets show similar resilience, or will the prospect of another 50 bps of Fed tightening this year – plus the lagged impact of the previous 500 bps – weigh on investors and prompt a profit-taking reversal?

Japanese stocks could be the most vulnerable to a correction. The benchmark Nikkei on Wednesday rallied another 1.4% to a fresh 33-year peak above 33,500 points, its 20th rise in the last 25 trading sessions.

Markets have the latest trade and machinery orders data from Japan to digest on Thursday. Trade activity in May is expected to have slumped – economists are forecasting a 10% year-on-year slump in imports and a 0.8% fall in exports.

China’s central bank, meanwhile, is expected to cut the borrowing cost of medium-term policy loans for the first time in 10 months on Thursday, after it lowered two key short-term policy rates earlier this week.

An outlier among its global peers, the People’s Bank of China is battling disinflation – perhaps even deflation soon – and an under-performing economy that has significantly soured investors’ outlook on the country’s financial assets.

Further easing may help shore up confidence in the economy, but will widen the yield gap with overseas assets, put the yuan under further pressure, and risk even greater capital outflows – the Institute of International Finance said on Wednesday net inbound foreign direct investment to China in 2023 will be the lowest in 18 years.

Beijing also releases a batch of top-tier economic indicators for May on Thursday – urban investment, industrial production, house prices, retail sales, and unemployment – which are broadly expected to reflect a weak growth environment.

The annual rate of growth in investment is seen slowing to 4.4% from 4.7%, industrial production to 3.6% from 5.6%, and retail sales to 13.6% from 18.4%.

Here are key developments that could provide more direction to markets on Thursday:

– China investment, industrial production, house prices, retail sales, unemployment (May)

– China medium-term lending facility loan rate

– Australia unemployment (May)

(By Jamie McGeever)

 

This article originally appeared on reuters.com

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