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Global equity/currency market update: Asian Stocks Dip Amid Uncertainty Over U.S. Monetary Policy; Oil Prices Rise

17 May 2024 8:53 am
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Mumbai, 17 May (Commoditiescontrol): Asian stocks edged lower on Friday as traders weighed the implications of U.S. monetary policy after Federal Reserve officials suggested that interest rates may need to remain higher for longer, despite early signs of easing inflation. Wednesday's data showed cooling U.S. consumer price inflation, initially sparking market optimism for at least two rate cuts this year. However, the excitement waned as the labor market remained tight, and central bankers remained cautious about inflation.

Traders are currently pricing in 47 basis points of easing from the Fed this year, with a rate cut fully expected in November. The MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.14%, despite reaching a two-year high on Thursday. The index is still on track for a 2.6% increase this week, marking its fourth consecutive week of gains.

Japan's Nikkei dropped 0.48%, while China's blue-chip stocks inched up 0.15% in early trading. Hong Kong's Hang Seng Index was a standout, rising 0.77% to its highest level since August 2023.

Despite positive inflation data, Fed policymakers have not shifted their views on rate cuts. New York Fed President John Williams stated that monetary policy is "restrictive" and in a "good place," indicating no immediate need for change. Data on Thursday showed that new jobless claims in the U.S. fell last week, suggesting a still-tight labor market even as job growth slows.

Overnight, the Dow briefly reached 40,051.05, while the S&P 500 and Nasdaq hit record highs before closing slightly lower. In currency markets, the dollar headed for its largest weekly fall against the euro in two and a half months. The euro rose about 1% against the dollar, last trading at $1.08595. The yen weakened 0.23% to 155.80 per dollar, giving back some gains from earlier in the week. The yen has fallen around 9.5% this year due to Japan's loose monetary policy compared to rising U.S. rates.

Tokyo is suspected of intervening to support the yen after it tumbled to multi-decade lows. On Friday, the Bank of Japan kept bond buying amounts unchanged after reducing purchases earlier in the week.

In commodities, oil prices rose in Asian trading, with Brent crude set for its first weekly increase in three weeks amid signs of improving global demand and slowing U.S. inflation. U.S. crude remained steady at $79.18 a barrel, while Brent inched up 0.1% to $83.35 per barrel.

(By Commoditiescontrol Bureau: 09820130172)

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