Asian markets brace for mixed open after Powell rejects investor optimism

Asian markets brace for mixed open after Powell rejects investor optimism

After a late rally in US shares in a volatile session, Bloomberg stock markets in Asia are primed for a mixed open Wednesday after Federal Reserve Chair Jerome Powell rebuffed an opportunity to tamp down investor optimism.

Equities in Australia and stock futures for Japan edged higher while contracts in Hong Kong fell. The S&P 500 rose more than 1%, reversing a 0.6% drop. The tech-heavy Nasdaq 100 outperformed major benchmarks, climbing more than 2%.

Australian bonds fell in early trading after declines in Treasuries on Tuesday that pushed the benchmark 10 year yield three basis points higher to 3.67%. The yen gained more than 1% on Tuesday after rallying more than 1%, while the Aussie weakened slightly after the Reserve Bank of Australia increased interest rates Tuesday.

Powell's sober comments echoed those made after the FOMC meeting last week, soothing traders who were expecting the Fed chief to push back on the loosening of financial conditions and Friday's bumper jobs report. Powell stated that further hikes will be needed if the jobs market remains strong.

Minneapolis Fed President Neel Kashkari said the Fed would likely have to raise interest rates to 5.4% at the top of its target range given the strength in the US jobs market. The Fed increased rates by 25 basis points last week to a band of 4.5% to 4.75%.

Bill Adams, chief economist at Comerica Bank in Dallas, wrote that Powell had a chance to signal a shift to a more aggressive posture. The Fed will likely make one or two more hikes before going on hold in the near-term. Powell says further rate hikes are needed and bonds take heed.

After Hindenburg Research released its flagship report two weeks ago, investors will be paying close attention to the shares in Adani companies. Adani company bonds have been snapped up by hedge fund and distressed debt investors. Moody s said in a report that Indian banks exposure to the Adani Group is not large enough to affect their credit quality.

The price of oil rose by 4.1% on Tuesday, its biggest one-day move since November, helped along by a rebound in demand from China.

As a result of the renewed tensions with China and a brewing showdown with House Republicans over raising the federal debt ceiling, traders will keep an eye on Joe Biden's speech to a joint session of Congress on Tuesday night in Washington.

Read: NYSE Plans to pay in full majority of claims tied to Glitch.

Some of the major moves in markets as of 8: 35 a.m. Tokyo time:

The yield on 10 year Treasuries rose three basis points to 3.67% on all treasuries.

The story was produced with the help of Bloomberg Automation.

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