Treasuries experienced a decline following comments from a Federal Reserve official suggesting that recent US economic data might postpone anticipated interest-rate reductions this year. This had a ripple effect, causing Japanese stocks to pull down broader Asian equities.
Yields on Treasuries saw an increase across different tenors in Asia after Fed Governor Christopher Waller stated post-Wednesday close that there's no immediate need to lower interest rates. He highlighted the necessity of observing "at least a couple months of better inflation data" before considering rate cuts. This led to a four basis points rise in two-year Treasury yields, making the dollar stronger against its Group-of-10 peers.
Japanese shares dipped as they traded ex-dividend, following a near-record high of the Nikkei 225 index on Wednesday. In contrast, Australian stocks reached new highs, while Hong Kong shares remained unchanged. Equities in Mainland China, Taiwan, and Korea experienced declines.
Investors are keeping an eye on upcoming earnings reports from Chinese banks, given that Chinese stocks have given up their March gains amid disappointing earnings, raising concerns about the sustainability of the policy-driven rally.
US equity futures were unchanged in Asian trading after the S&P 500 closed at a record. This comes at a time when many institutional investors might be rebalancing their portfolios.
The yen's performance will continue to be a focal point in Asia. After retreating from its lowest level since 1990, the currency stabilized in early trading. The Bank of Japan's recent policy meeting minutes revealed discussions on the need for a cautious approach towards further interest rate hikes.
In the commodities market, oil prices increased, heading for a substantial quarterly gain driven by expectations of OPEC+ supply cuts tightening the global market. Meanwhile, gold prices steadied after three consecutive sessions of gains.
The US government's credit rating was reaffirmed by S&P Global Ratings at AA+, despite ongoing fiscal challenges. The statement from S&P highlighted the lack of bipartisan cooperation to significantly reduce deficits and address budgetary constraints.
Following a roughly 25% surge in the S&P 500 since late October, concerns have been raised about overextended market positioning, making stocks more susceptible to short-term profit-taking. JPMorgan Chase & Co.'s Dubravko Lakos-Bujas cautioned clients about the potential risk of being caught on the wrong side of the momentum trade and stressed the importance of diversification and risk management in portfolios. He also reiterated concerns about the risk of correction due to excessive crowding in the market's top-performing stocks.
