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By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The Federal Reserve has spoken, and as far as investors are concerned, the message was clear – clearly hawkish. Now it’s down to the Bank of Japan and the Bank of England, the two biggest and most important central bank decisions on Thursday.
The latest central bank meetings are coming to a head with decisions on Thursday coming from Norway and Sweden, but also mainly from Asia, Taiwan and the Philippines.
Investors in Asia went on the defensive on Thursday after the Fed cut interest rates by a quarter of a percent as expected, but showed a slower pace.
Fed officials raised their mid-term outlook while maintaining a long-term neutral stance, significantly raised their 2025 rate hike outlook, and continued to outline ways to cut rates next year.
Rising interest rates and continued easing are how Fed Chairman Jerome Powell struggled during his press conference. And while he was talking to the media, stocks and Treasuries went up and the dollar went up a lot.
Wall Street ended the day significantly lower. The Nasdaq fell more than 3%, the Dow fell for a tenth day – its longest loss in 50 years – the dollar jumped to a two-year high and yields rose across the board.
As Janus Henderson’s Dan Siluk noted, there is the possibility of a “temporary break” next year, and the Fed is signaling that “we are in a very high and inflationary environment.”
Assets in emerging markets will soon hit a critical point on Thursday.
All eyes in Asia are now turning to Tokyo. The BOJ is expected to freeze interest rates, leaving investors to take what Governor Kazuo Ueda said at his press conference.
Japanese exchange rates show a 60% chance that the BOJ will raise rates by 25 bps in January, down from about 70% a few weeks ago. Quarterly hikes are not fully priced until May, and only 45 bps of stabilization is expected by December, the swaps curve shows.
The Philippines’ central bank is expected to cut its main policy rate by a quarter to 5.75%, according to a Reuters poll, as inflation moderates and the economy slows.
Although inflation is rising for the second month in November to 2.5%, it is within 2%-4% of the central bank. This will be the third cut in a row, and economists expect three more cuts next year.
Policymakers in Taiwan, meanwhile, are expected to keep the key policy unchanged at 2% and keep it there next year due to a strong economy and concerns about inflation.
