By Kevin Buckland
TOKYO, Nov 25 (Reuters) – U.S.
Expectations of a less aggressive pace from US it. Monetary tightening from as soon as next month continues to support some stock markets in Asia, but Hong Kong’s Hang Seng dropped sharply as record COVID-19 infections in China dimmed the outlook.
The 10-year Treasury yield dipped to 3.659%, the lowest since October 5 in Tokyo trading, after Thursday’s Thanksgiving holiday. The two-year yield slipped to a one-week low at 4.44%.
The dollar index, which measures the greenback against the euro, yen and four other rivals, hovered not far from Thursday’s low of 105.62, and last stood at 105.86.
A “substantial majority” of Fed policymakers agreed that it would “be appropriate soon” to slow the pace of interest rate hikes, minutes of their latest meeting showed on Wednesday.
Futures markets show that investors now see US it. Rates peaked just above 5% around May, and are pricing in about a two-thirds chance that the Fed slows to a half-point hike on Dec. 14 from a string of 75 basis-point increases.
“When I saw how the market reacted — the stock rally, the bond yields falling and the dollar weakening — if I were the Fed, I’d think I’d better go and say something really hawkish now, because otherwise the last 75 basis points Points of tightening that I have done are basically useless, and the next 50 will just be swallowed by the market, ‘don’t worry about it, the pivot point is coming’,” said ING economist Rob Carnell.
“You want your rate hikes to mean something, so I think once everyone has digested their turkey and gotten back to work — probably early next week — we’re going to hear some pretty hawkish stuff coming out of the Fed.”
S&P 500 e-mini futures peaked 0.2% higher before the restart of Wall Street trading on Friday.
Asia-Pacific share markets were mixed, with Australia’s benchmark managing a 0.35% rise, but a tech-led selloff in Hong Kong shares weighing on sentiment in other parts of the region.
The Hang Seng dropped 0.93%, with the tech sector tumbling 2.22%.
Japan’s Nikkei slumped 0.34% and South Korea’s Kospi lost 0.31%.
China reported record high COVID infections on Thursday, with cities nationwide imposing localized lockdowns, mass testing and other curbs, snuffing out recent optimism about the world’s second largest economy moving from strict zero-COVID policies to living with the disease.
“Investors are right to be worried,” said Carnell of ING. “They still in China don’t have the adequate health network that they would be able to deal with a full-on outbreak with many people getting sick.”
Mainland Chinese blue chips, however, rose 0.51%, buoyed by government measures to support the real estate market. An index of property developer shares rose by 5.33%.
Oil rose slightly, paring some of the losses of the week, which were driven by concerns about Chinese demand and expectations a high price cap planned by the Group of Seven Nations on Russian oil will keep supply flowing.
Brent crude futures rose 13 cents, or 0.2%, to $85.47 a barrel.
West Texas Intermediate (WTI) crude futures jumped 35 cents, or 0.5%, from Wednesday’s close to $78.32 a barrel. There was no WTI settlement on Thursday due to the US it. holiday
Both contracts are headed for their third consecutive weekly decline, on track to fall about 2%.
Gold ticked 0.2% higher to $1,758.44 an ounce amid dollar weakness.
(Reporting by Kevin Buckland; Editing by William Mallard)