Stocks Struggle as US Jobs Dry Up, Kiwi Leaps on RBNZ Surprise
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SINGAPORE, (Reuters) – Stocks struggled Wednesday to make gains. The dollar suffered losses while bonds held on to gains as investors were worried about the U.S. labour market. A larger-than-expected rate increase lifted the kiwi dollars, but the dollar was unable to move forward.
Asia trade was weakened by holiday in Hong Kong, China. MSCI's Asia-Pacific Index excluding Japan did little better than flat. Japan's Nikkei fell by 1%.
Overnight, Wall Street indexes saw their winning streak end after a four-day win streak. All three major indexes fell overnight, and interest rates expectations were lowered following data showing that U.S. job openings had fallen to their lowest level in almost two years in February.
The two-year treasury yields (which closely follow short-term rates expectations) fell almost 15 basis points. The dollar followed the move to reach two-month lows. [US/][FRX/]
Jamie Dimon, chief executive at JPMorgan Chase & Co in the United States, warned shareholders that the market's chances of a recession are increasing. He also stated that the confidence worries that have shaken banks have not subsided.
He said, "The current crisis has not yet ended." "And even when it is over, it will have repercussions for many years to come."
U.S. interest rates futures have rallied strongly in the past few weeks as traders believe that banks will reduce lending pressure and spare monetary policymakers.
Futures pricing suggests that there is a greater chance than not that the Federal Reserve will have stopped raising rates and has made more cuts this year.
The yields for two-years are at 3.8459%, and the yields for 10-years are at 3.35177%. The entire U.S yield curve is below the Fed funds rate window at 5%.
Overnight, gold, which has no yield, reached a new one-year high of $2,000 per ounce.
John Briggs, head of economics at NatWest Markets, stated that while the Fed may sneak one more hike in, the probabilities surrounding the policy rate are strongly skewed towards the downside.
"We don't believe this is going to change market pricing any time soon."
Markets outside the United States see central banks continuing to hike inflation. According to a Reuters poll, most FX strategists expect the dollar to remain under pressure this year.
The Reserve Bank of New Zealand surprised traders on Wednesday with a 50 basis-point hike that saw the Kiwi rise 1% to a two month high. This contrasts with Australia's central banks, which stopped hiking on Tuesday.
Investors elsewhere see some more rate increases in Europe where German exports are surprising strong. At $1.097373, the euro was at its highest level in two months. Last night, the kiwi gained 0.7% to $0.6355.
The great hope for growth is in Asia and China.
Japanese data released Wednesday showed that services activity increased at the fastest rate in over nine years in March, despite weak factory output.
The country's sprawling manufacturing sector suffered a slowdown in March, according to data earlier in the week. However, foreign investors' optimism about future policy support for businesses led to record inflows for the first quarter.