Changing Fed Opinions Strengthen the Dollar & Impact Stocks – Asia Market Wrap

The Dollar surged, dragging on Asian shares, as risk appetite remained muted with the potential of less aggressive Fed interest rate decreases.

The Dollar strengthened against all Group-of-10 currencies, with 10-year Treasury rates rising above 4.2% for the first time since July earlier this week. Japan’s 40-year government note yields soared to their highest level in 16 years, coinciding with a worldwide bond selloff. The Yen declined by up to 0.8% against the Dollar.

A measure of Asian stocks was flat, with falls in Japan and increases in South Korea. US futures edged lower. Hong Kong and mainland Chinese equities rose as a major government-linked think tank urged authorities to issue 2 trillion Yuan ($281 billion) in special government bonds to help form a market stabilisation fund.

The broader lacklustre performance of equities comes as investors have reduced their bets on rapid policy easing, indicators that the US economy is strong, and fears about larger fiscal deficits following the presidential election. Most Fed officials who spoke earlier this week indicated that they want a slower pace of rate decreases.

Back in Asia, two stock listings were the focus. Tokyo Metro’s shares jumped up to 47% on their debut, after the business collected 348.6 billion Yen ($2.3 billion) in the country’s largest IPO since mobile carrier SoftBank went public in 2018. In Hong Kong, China Resources Beverage Holdings rose 14% in reaction to one of the city’s largest IPOs this year.