Today’s News

Asian shares remained cautious on Friday, while the U.S. dollar rebounded from its lowest levels in a year, as investors become more cautious ahead of Powell’s speech at Jackson Hole.  

Markets are looking for confirmation that U.S. interest rate cuts will begin in September. 

The Japanese yen strengthened by 0.3% to 145.77 per dollar, and bond yields edged up following remarks from Bank of Japan (BOJ) Governor Kazuo Ueda, who addressed lawmakers earlier in the day.  

Although traders see little chance of a BOJ rate hike in October, Ueda maintained that the central bank is ready to raise rates if economic conditions align with its forecasts. 

Data released earlier showed that Japan’s core inflation accelerated for the third consecutive month. However, the slowdown in demand-driven price increases suggests that there is no immediate urgency for rate hikes.  

Krishna Bhimavarapu, APAC economist at State Street Global Advisors, noted that the stronger yen and reintroduction of energy subsidies could slow inflation in the near term, adding, “If the data evolves as we expect, it could mean that the next BOJ hike may not come until December as fears of rapid inflation ease to an extent.” 

On Friday, MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 0.4%, though it was still on track for a weekly gain of 0.6%. Japan’s Nikkei index remained flat near three-week highs, while China’s blue-chip index rose by 0.3%. Meanwhile, Hong Kong’s Hang Seng index dropped by 0.4%, and South Korea’s KOSPI index declined by 0.5%. 

Markets Turn Cautious Ahead of Powell’s Jackson Hole Speech

Overnight, Wall Street saw a downturn as sentiment became more cautious ahead of Powell’s speech at Jackson Hole. Three Fed officials hinted at a possible rate cut in September, advocating for a “slow and methodical” approach. 

Robert Carnell, regional head of research for Asia-Pacific at ING, pointed out that Powell’s upcoming speech has the potential to either excite or disappoint markets, depending on how it aligns with current market expectations. “As any decision that deviates from market pricing will rest on as yet unknown data, it is hard to see how Powell can commit to much beyond some easing of some sort in September, and even then, only barring data accidents,” Carnell said. 

Treasury yields fell slightly on Friday after rising for the first time in five sessions on Thursday. The 10-year yield slipped by 2 basis points to 3.8426% in Asia, while the two-year yield dropped by 3 basis points to 3.9845%. 

Despite the declining yields, the dollar managed to recover from selling pressure overnight. The euro pulled back from its one-year high, facing resistance at $1.1139. Wall Street futures gained between 0.2% and 0.4%, while commodities appeared poised to end the week lower. 

Brent crude futures remained flat at $76.04 per barrel but were down more than 3% for the week due to rising U.S. crude inventories and a weakening demand outlook in China. Gold prices fell by 0.7.

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