Asia: Markets swing as US data tempers Fed hopes

ASIAN stocks were mixed on Wednesday following losses on Wall Street as forecast-beating US data jolted hopes the Federal Reserve could soon tone down its hawkish pace of interest rate hikes.

Suggestions that the US central bank could take its foot off the pedal as the world's top economy shows signs of slowing have helped fuel a rally across risk assets for more than a week

But some of the wind was taken out of their sails on Tuesday after data showed a rise in job openings while other numbers released indicated the manufacturing sector did not perform as badly as expected last month.

The readings suggest the economy continues to hold up despite recent signs of weakness in the face of decades-high inflation and numerous rate hikes that many observers warn will spark a recession.

They also come as the Fed concludes its latest policy meeting later in the day.

While it is widely tipped to unveil a fourth straight jumbo hike, the gathering was hotly anticipated by traders hoping for a hint from officials that they are ready to temper their speed of monetary tightening.

"Markets have been reacting to dovish expectations for Wednesday's (policy meeting), which I have argued are wrong," said SPI Asset Management's Stephen Innes.

"Based on US economic data out Tuesday, there is no way for the Federal Reserve to turn dovish. The labour market is still strong, and manufacturing is still (slightly) expanding."

He added: "Even if we see the Fed slow the pace of hikes, they are still hiking, the policy is still highly restrictive, front-end rates will still get worse before they get better.

"Sure, we could see a knee jerk higher on stocks via a lower Fed glide path, but will it be sustainable?"

Highlighting the tough jobs central banks face in the inflation fight, data out of South Korea on Wednesday and Britain on Tuesday indicated prices remain elevated, despite higher borrowing costs after the negative lead from Wall Street, Asia fluctuated.

Hong Kong edged down after soaring more than 5 per cent on Tuesday following an unverified statement saying China was forming a committee to consider rolling back some painful zero-Covid measures.

The foreign ministry in Beijing said it was unaware of such a committee later on Tuesday, while some commentators said authorities have actually boosted containment measures since a key Communist Party conference last month.

There were also losses in Singapore, Jakarta and Wellington.

But Shanghai, Sydney, Taipei and Manila rose. Seoul was also up on Wednesday as traders brushed off news North Korea had fired at least 10 missiles, including one that the South's military said landed close to its territorial waters for the "first time".

Tokyo ended the morning flat even as tech titan Sony racked up gains of more than eight percent a day after it lifted its annual net profit and sales forecasts thanks to the weak yen.

Oil prices jumped after a report said US stockpiles saw a huge drop last week, suggesting demand remains intact as worries about supplies continue to swirl.

While well down from their post-Ukraine-invasion peak, both main contracts have jumped in recent weeks after Opec and other major producers said they would slash output.

The decision came after a drop in prices caused by global recession concerns, China's demand-sapping lockdowns and the strong dollar, which makes the commodity expensive for buyers using other currencies. AFP

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