Asian benchmarks are mixed as US seems committed to current rates

Currency traders pass by the screen showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, April 17, 2024. (AP Photo/Ahn Young-joon)

TOKYO — Asian shares were trading mixed Wednesday, as expectations resurfaced that U.S. interest rates may stay high for a while.

Japan’s benchmark Nikkei 225 dipped 0.5 percent in afternoon trading to 38,296.69. Australia’s S&P/ASX 200 edged up less than 0.1 percent to 7,618.50. South Korea’s Kospi was little changed, inching down to 2,608.93. Hong Kong’s Hang Seng slipped 0.2 percent to 16,219.84, while the Shanghai Composite gained 1.1 percent to 3,040.72.

The mixed reaction came after Federal Reserve Chairman Jerome Powell said at an event Tuesday that the central bank has been waiting to cut its main interest rate, which is at its highest level since 2001, because it first needs more confidence inflation is heading sustainably down to its 2 percent target.

“Appetite for risk-taking remains weak, with Federal Reserve Chair Jerome Powell validating a later timeline for rate cuts, alongside a raft of Fed speakers calling for more patience in easing,” said Yeap Jun Rong, market analyst at IG.

READ: US Fed’s Powell says inflation fight may take ‘longer than expected’

On Wall Street, the S&P 500 fell 10.41 points, or 0.2 percent, to 5,051.41. The index deepened its loss from the day before when it sank under the pressure brought by a jump in Treasury yields.

The Dow Jones Industrial Average rose 63.86, or 0.2 percent, to 37,798.97, and the Nasdaq composite fell 19.77, or 0.1 percent, to 15,865.25.

Inflation hotter than forecast

But the majority of stocks fell as Treasury yields rose following Powell’s comments. They’ve been climbing rapidly as traders give up hopes that the Fed will deliver many cuts to interest rates this year. High rates hurt prices for all kinds of investments and raise the risk of a recession in the future.

“The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said, referring to a string of reports this year that showed inflation remaining hotter than forecast.

He suggested if higher inflation does persist, the Fed will hold rates steady “for as long as needed.” But he also acknowledged the Fed could cut rates if the job market unexpectedly weakens.

The yield on the two-year Treasury, which tracks expectations for Fed action, shot as high as 5 percent immediately after Powell spoke and got back to where it was in November.

But yields later pared their gains as the afternoon progressed, and the two-year yield drifted back to 4.98 percent. That’s still up from 4.91% late Monday.

Traders are mostly betting on the Fed delivering just one or two cuts to interest rates this year after coming into 2024 expecting six or more. They’re now also betting on a 12.5 percent probability that no cuts are coming, up from just 1.2 percent a month ago, according to data from CME Group.

Fatter profits and revenues

Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon.

The stock of Donald Trump’s social media company also slumped again. Trump Media & Technology Group fell another 14.2 percent to follow up on its 18.3 percent slide from Monday.

READ: Trump Media stock slides to more than 66% below its peak

The company said it’s rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been canceled, is at risk of cancellation, or is being suppressed on other platforms and services.”

The stock has dropped below $23 after nearing $80 last month as euphoria faded around the stock and the company made moves to clear the way for some investors to sell shares.

In energy trading, benchmark U.S. crude shed 52 cents to $84.54 a barrel. Brent crude, the international standard, fell 45 cents to $89.57 a barrel.

In currency trading, the U.S. dollar inched down to 154.64 Japanese yen from 154.65 yen. The euro cost $1.0623, up from $1.0617.