Asian shares wobble as dollar hovers near three-month high

Sydney —Asian shares wobbled while the dollar was perched near a three-month top on Thursday after a spate of economic data overnight appeared to support US Federal Reserve chair Jerome Powell’s hawkish guidance on further interest rate increases.

In his second day on Capitol Hill, Powell stuck to his message of higher and potentially faster rate hikes, but emphasised that debate was still under way with a decision hinging on data to be issued before the US central bank’s policy meeting in two weeks.

With riskier assets still reeling from the heavy sell-off a day earlier, investors are focused on February jobs data due on Friday for confirmation that continued strong jobs growth supports bigger rate increases.

Forecasts are centred on a more modest increase of 205,000 after January’s 517,000 jump led markets to reprice their monetary tightening expectations.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2% on Thursday, extending a drop of 1.4% the previous session. Japan’s Nikkei, on the other hand, rose 0.6%.

Both China’s blue chips and Hong Kong’s Hang Seng index skidded 0.2%. S&P 500 futures eased 0.1% and Nasdaq futures were off 0.3%

Inflation data out of China showed on Thursday that domestic demand still remained tepid.

Relentless barrage of rate hikes

In the US, data released overnight painted a picture of a sturdy economy and did very little to assuage fears that the Fed will ease up on its relentless barrage of rate hikes.

Job openings remain elevated, private payrolls beat consensus estimates and demand for home loans increased despite the ongoing upward trajectory of mortgage rates.

“It’s hard to see this as clarifying the employment picture ahead of tomorrow’s payrolls release, which remains a lottery,” said Robert Carnell, regional head of research, Asia-Pacific at ING.

“Although essentially the same message, Powell’s tone yesterday to Congress was regarded by many commentators as slightly softer, noting that data would be the final arbiter of the size of the next hike and that no decision on the size of the March hike had yet been made.”

The major US stock indices oscillated between modest gains and losses throughout the day, with the Nasdaq joining the S&P 500 in positive territory at the closing bell and the Dow posting a modest loss.

Financial markets have priced in a 78.6% likelihood of a 50-basis-point (bps) hike to the key interest rate at the conclusion of the Fed’s March meeting, up from about 30% at the beginning of the week, according to CME’s FedWatch tool.