news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Overnight, overseas market trends reversed again. U.S. stocks ended their rebound and fell along with U.S. bonds and gold, driving the Asian market down in early trading on Friday.

Specifically, the S&P 500 fell 1% at one point, and the Nasdaq, which is dominated by technology stocks, closed down 1.68%. Technology stocks, chip stocks, and AI concept stocks led the declines.

The decline in U.S. stocks led to a fall in early Asian trading, with stock index futures for Japan, Australia and Hong Kong stocks falling.

U.S. Treasuries also ended their upward trend, with Treasury yields rising one after another. The 10-year Treasury yield rose by 5 basis points, while the two-year yield, which is more sensitive to policy, climbed by 7 basis points.

The dollar posted its biggest gain in more than a month.

The reason behind this decline is that the Federal Reserve's signals were less dovish than market expectations, market expectations for rate cuts fell, and the disappointing US economic data reignited market concerns about economic growth.

On the eve of Powell's speech at the Jackson Hole conference, Federal Reserve officials successively "broadcasted" information. Although they pointed out that it is appropriate to start cutting interest rates soon, they also emphasized that the pace of rate cuts should be "gradual" and "orderly", rather than as radical as the market expects.

Market expectations for large rate cuts from the Federal Reserve have eased, with swap pricing showing three 25 basis point rate cuts are expected in the three remaining Fed policy meetings this year, compared with around 100 basis point cuts expected just two days ago.

The shift means swap traders no longer expect a 50 basis point rate cut in 2024.

SlateStone Wealth analyst Kenny Polcari said:

We are not discussing if they will cut rates, but by how much and how many times by the end of the year. The U.S. economy is not in trouble, so there is no need to suggest that it is.

At the same time, a series of poor economic data were released overnight. The number of applications for unemployment benefits continued to hover at a multi-year high; existing home sales increased for the first time in five months, while home prices broke through historical lows and hit a record high; the Chicago Fed National PMI index fell sharply, shrinking at the fastest rate this year, and the results of the manufacturing confidence survey were terrible...

It is worth mentioning that the market had high expectations for the Jackson Hole meeting and aggressively expected a rate cut. There were warnings that it might be difficult for Powell to give a more dovish signal than the market expected, and people should be wary of a dollar pullback and market selling behavior at the meeting.

In addition, regarding the recent trend of the US dollar, Citi believes that the US dollar index is currently close to the important support level of 100.30-100.82. Combined with the weak European economic data that has relatively boosted the US dollar, Powell's less dovish than market expectations, and the possibility of the "Trump deal" being rekindled, the US dollar will be supported.