TOKYO — Asian stocks were trading mixed Wednesday as expectations resurfaced that U.S. interest rates could remain high for some time.
Japan’s benchmark Nikkei 225 index fell 0.6% in morning trading to 38,226.39. Australia’s S&P/ASX 200 index edged up 0.2% to 7,624.70. South Korea’s Kospi fell 0.3% to 2,603.22. Hong Kong’s Hang Seng gained 0.2% to 16,283.91, while the Shanghai Composite gained 0.6% to 3,026.20.
The mixed reaction came after Federal Reserve Chairman Jerome Powell said at an event Tuesday that the central bank was waiting to cut its main interest rate, which is at its highest level since 2001, because that it first needed more confidence that inflation was heading towards a sustainable decline. its objective of 2%.
“Appetite for risk-taking remains weak as Federal Reserve Chairman Jerome Powell validated a later timetable for rate cuts, alongside a series of Fed speakers calling for more patience in easing,” said Yeap Jun Rong, market analyst at IG.
On Wall Street, the S&P 500 index fell 10.41 points, or 0.2%, to 5,051.41. The index worsened its loss from the day before, when it sank under pressure from a rise in Treasury yields.
The Dow Jones Industrial Average rose 63.86, or 0.2%, to 37,798.97, and the Nasdaq composite fell 19.77, or 0.1%, to 15,865.25.
But the majority of stocks fell as Treasury yields rose following Powell’s comments. They have climbed quickly as traders give up hope that the Fed will make many interest rate cuts this year. High rates hurt the prices of all kinds of investments and increase the risk of a recession in the future.
“The recent data clearly has not given us any more confidence and instead indicates that it will likely take longer than expected to achieve that confidence,” Powell said, referring to a series of reports released this year that showed that inflation remained higher than expected.
He suggested that if higher inflation persists, the Fed would keep rates steady “as long as necessary.” But he also acknowledged that the Fed could cut rates if the labor market weakens unexpectedly.
The yield on two-year Treasury notes, which tracks expectations for Fed action, rose as high as 5% immediately after Powell’s speech and returned to its November level.
But yields then pared their gains as the afternoon wore on, and the two-year yield fell back to 4.98%. That’s still up from 4.91% Monday evening.
Traders are mostly betting on one or two Fed interest rate cuts this year, after expecting six or more in 2024. They are now also betting on a 12.5% chance that no cuts will be forecast, compared to only 1.2% a month ago, according to data from the CME group.
Companies are under even more pressure than usual to announce bigger profits and revenues, as the other lever that determines stock prices, interest rates, doesn’t seem likely to have much effect in the near future.
Shares of Donald Trump’s social media company also fell again. Trump Media & Technology Group fell another 14.2%, following its 18.3% decline on Monday.
The company said it is rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been canceled, is at risk of cancellation, or is being removed on other platforms and services”.
The stock fell below $23 after hovering near $80 last month, as euphoria faded around the stock and the company took steps to allow some investors to sell shares.
In energy trading, benchmark U.S. crude lost 47 cents to $84.89 a barrel. Brent crude, the international standard, fell 44 cents to $89.58 a barrel.
In currency trading, the U.S. dollar rose slightly to 154.67 Japanese yen from 154.65 yen. The euro costs $1.0630, up from $1.0617.
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AP Business Editor Stan Choe contributed.
