Asia Stocks Head for Cautious Start After Fed: Markets Wrap

Asian stocks headed for a cautious start Thursday after Federal Reserve Chair Jerome Powell highlighted the uncertainty of an economic rebound without further stimulus, and U.S. shares retreated.

Futures were flat in Japan and dipped in Hong Kong and Australia. S&P 500 contracts were little changed. The U.S. benchmark erased gains on Wednesdayto end the session lower after Powell said he’s not sure if the faster-than-expected recovery will continue. A tumble in tech giants such as Apple Inc. and Facebook Inc. also weighed on the index.

The Treasury yield curve steepened as Powell stopped short of offering new specifics on the Fed’s approach to the monthly bond purchases that have buttressed markets. Some traders may have been expecting signals regarding plans to target longer maturities. The dollar was little changed.

Fed officials have stressed in recent weeks that the U.S. recovery is highly dependent on the nation’s ability to better control the coronavirus, and that further fiscal stimulus is likely needed to support jobs and incomes. “The recovery has progressed more quickly than generally expected,” Powell said, while cautioning that “the path ahead remains highly uncertain.” It was the Federal Open Market Committee’s final scheduled meeting before the U.S. presidential election on Nov. 3.

“The fact that he’s highlighting the negative potential economic consequences of a lack of Congressional action on fiscal stimulus definitely served to unnerve investors,” said Alec Young, chief investment officer at Tactical Alpha LLC, referring to Powell.

The White House strongly signaled Wednesday that it is willing to increase its offer in talks with Democrats, and that Senate Republicans should go along in order to seal a stimulus deal in the next week to 10 days.

Elsewhere, oil surged after government data showed shrinking U.S. crude stockpiles.

These are some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 7:10 a.m. in Tokyo. The gauge fell 0.5% on Wednesday.
  • Futures on Japan’s Nikkei 225 were little changed.
  • Hang Seng futures lost 0.2%.
  • Futures on Australia’s S&P/ASX 200 Index fell 0.2%.

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.1%.
  • The euro bought $1.1816.
  • The yen was at 104.95 per dollar.
  • The offshore yuan traded at 6.7458 per dollar.

Bonds

  • The yield on 10-year Treasuries gained two basis points to 0.70%.

Commodities

  • West Texas Intermediate crude was at $40.16 a barrel after jumping 4.9%.
  • Gold was at $1,960.14 an ounce, little changed.

— With assistance by Rita Nazareth, and Claire Ballentine

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