The Asian open on Thursday may be determined by which of the two competing storylines thrown up by late U.S. trade on Wednesday investors choose to side with: Treasury Secretary Janet Yellen’s statements on the banking sector or the Fed’s dovish raise.
After the Fed hiked rates by a quarter point and Chair Jerome Powell stated policymakers contemplated a pause in light of recent instability in the domestic banking system, implied US rates and Treasury bond yields fell substantially.
However, Wall Street finally followed Yellen’s lead, who stated that the government “is not considering insuring all uninsured bank deposits,” which many experts believe would go a long way toward averting future catastrophes.
The three major US indexes, which had risen during Powell’s press conference, fell back 1.6%.
Powell, of course, beat the anti-inflation drum, stating that the Fed’s basic case is for no rate fall this year. Stocks were unsatisfied, but Yellen’s words crushed financials and eventually the wider indices—U.S. financial stocks dipped 3.7% and regional banks plummeted 5.3%.
Powell’s press conference implied that the Fed is taking a ‘wait and watch’ attitude on the impact of expected credit tightening on the economy and inflation. He stated several times that officials just do not know how the next several months will unfold.
That explains why the currency fell along with US rates on Wednesday. However, policymakers in Asia will remain wary, and they may continue to favor tightening rather than pausing.
On Thursday, the Philippines’ and Taiwanese central banks will make policy decisions; the Philippine central bank is projected to raise rates by 25 basis points to 6.25%, while Taiwan’s key rate is predicted to remain unchanged at 1.75%.
Inflation reports from Singapore and Hong Kong will also be published on Thursday, while the Bank of England is believed to follow the Fed and hike interest rates by a quarter point, to 4.25%.
Here are three important factors that might give more direction to markets on Thursday:
– Tankan survey of Japan (March)
– Policy decision by Bank of England
– Euro zone flash consumer surge (March)