US equity futures rose, after a decline on Wednesday in the S&P 500 and Nasdaq 100 amid indications from Federal Reserve officials that policy would tighten policy further. Shares in Australia and Japan climbed.
Benchmarks for Hong Kong and mainland stocks fell after the People’s Bank of China warned inflation may pick up, limiting monetary easing. Meanwhile, China doubled its injection of short-term cash into the banking system as optimism about economic growth stoked a rapid selloff in government bonds.
Benchmark 10-year government bond yields in Australia and New Zealand fell. Treasury yields climbed slightly after moves on Wednesday that widened the difference between long-date and short-dated bonds to levels not seen since the early 1980s, underscoring investor concern about the risk of recession.
The action Treasuries followed the biggest increase in eight months for US retail sales, outpacing estimates and indicating Fed tightening has further to run to stymie inflation. San Francisco Fed president Mary Daly said a pause in rate hikes was “off the table”, and New York Fed president John Williams said the central bank should avoid incorporating financial stability risks into its considerations.
Goldman Sachs Group increased its forecast for peak US interest rates to 5.25% at the top of the range, up from the previous call 5%.
“Every time equity and bond markets are thinking the Fed is done and start taking off in a rally, the Fed gets out and starts talking that back down again,” Cheryl Smith, economist and portfolio manager for Trillium Asset Management, said on Bloomberg Television.
The dollar rose slightly following a volatile day in currency markets on Wednesday after a missile struck Poland, a NATO member. Polish officials said it was the result of Ukraine’s missile defence system rather than Russia, calming sentiment.
Elsewhere, European Central Bank policy makers may slow down their tempo of rate hikes, with only a 50 basis-point increase next month, according to people with knowledge of the matter. BM/DM