Asian stocks climbed on Wednesday as traders awaited policy clues from Beijing. The Chinese capital is hosting its week-long annual session of parliament. Some investors were disappointed by the previous lack of stimulus measures, while gold and bitcoin dropped after hitting record levels.
Traders hesitated to make large bets on Wednesday. They awaited Federal Reserve Chair Jerome Powell’s congressional testimony later that day. His words would reveal if and when the US central bank planned to start lowering interest rates.
Chinese stocks were neutral a day after Beijing established Beijing set a 5% growth target for 2024 at a key legislative meeting. This was largely expected by the market. However, the meeting did not include any big stimulus measures, which disappointed some investors. As a result, Chinese stocks were neutral a day after the announcement.
The blue-chip CSI 300 Index dropped slightly by 0.08%. In contrast, Hong Kong’s benchmark Hang Seng recovered from Tuesday’s 2.5% decline and surged 2% higher.
“The 2024 (China) economic targets still show officials are unwilling to quickly reflate the economy given concerns about excessive debt and the weakness of the yuan,” said Mansoor Mohi-uddin, chief economist at the Bank of Singapore.
A news conference on Wednesday at 0700 GMT will focus on the economy. Investors will pay close attention to it, as representatives from the People’s Bank of China and other regulators may answer media questions.
Investors adopted a wait-and-see strategy in Asia. As a result, MSCI’s broadest index of Asia-Pacific shares outside Japan fluctuated before settling 0.46% higher.
Megacap growth companies like Apple dragged down Wall Street’s three major indexes on Tuesday. The tech-heavy Nasdaq suffered the most, losing more than 1% due to weakness in the chip sector.
S&P 500 e-mini futures climbed 0.09%. Eurostoxx 50 futures are expected to open slightly higher. Similarly, German DAX futures and FTSE futures are up 0.14% and 0.05%, respectively.
The government’s budget will be a major event for British investors. Finance Minister Jeremy Hunt will try to reduce taxes and avoid the wrath of bond markets in his budget proposal.
The services sector in the United States showed a slowing expansion on Tuesday, according to statistics. Meanwhile, new manufacturing orders decreased more than expected. These data put the spotlight on the payrolls report that will be released later this week.
The previous session’s dismal data pushed the benchmark 10-year U.S. Treasury rates to a one-month low of 4.112%. However, they remained steady in Asian hours and closed at 4.147%.
Traders are watching U.S. economic statistics and leaders’ comments to see when the Fed will begin decreasing rates. According to the CME FedWatch tool, markets expect the Fed to begin its easing cycle in June with a 68% probability. They have factored in 88 basis points of reduction this year.
Powell’s congressional visits, starting Wednesday, are crucial, but analysts think he will stick to his theme.
“Of particular interest to markets is whether there is unanimity within the Fed on the continued descent in inflation, given the robust economic backdrop,” said Nicholas Chia, macro strategist at Standard Chartered.
“Powell’s testimony may offer more colour on the debates going on within the FOMC over their take on the deceleration in price pressures, and whether they will take the plunge to cut rates before inflation is back at the 2% target.”
In the currency market, the Japanese yen increased by 0.08% to reach 149.93 per dollar. Meanwhile, sterling remained unchanged at $1.2704, awaiting Britain’s budget announcement.
The euro last bought $1.0853, ahead of the European Central Bank’s policy decision on Thursday.
The ECB is widely expected to maintain interest rates at a record 4%. However, the focus will be on signals regarding when rates might start decreasing amidst persistent inflation.
According to the data from last week, eurozone inflation dropped in February. However, the underlying price rise stayed strong. This supported the ECB’s decision to maintain rates at record highs for a while longer. The ECB plans to start easing policy around mid-year.
Markets are pricing in a 90 basis point reduction from the ECB this year.
Bitcoin broke the previous session’s record high of $69,202 and continued to trade over $66,000. This surge was fueled by investors pouring money into U.S. spot exchange-traded crypto products.
Spot gold dipped to $2,127.36 per ounce after reaching an all-time high of $2,141.59 on Tuesday.
U.S. crude increased 0.29% to $78.38 per barrel, while Brent was up 0.28% at $82.27.
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