2 min read.Updated: 17 Jun 2021, 05:53 AM ISTBloomberg
Futures were little changed in Japan and Australia, and pointed lower in Hong Kong. The S&P 500 fell, but closed off its lows after Fed Chair Jerome Powell downplayed the risk of an immediate rate increase
Asia stocks looked set for a mixed start Thursday after Federal Reserve officials sped up their expected pace of policy tightening. U.S. stocks retreated and Treasury yields jumped with the dollar.
Futures were little changed in Japan and Australia, and pointed lower in Hong Kong. The S&P 500 fell, but closed off its lows after Fed Chair Jerome Powell downplayed the risk of an immediate rate increase. Policy makers disclosed that they expect two hikes by the end of 2023 and would begin a discussion about scaling back bond purchases. Ten-year Treasury yields jumped eight basis points, while five- and seven-year equivalents rose more as the market repriced the timing of rate increases.
Crude oil pared earlier gains as the strengthening dollar reduced the appeal of commodities priced in the currency. Gold dropped.
Investors had been looking for some clarity on the Fed’s plans to dial back some of the stimulus that is helping the recovery from the pandemic. Powell said officials had begun a discussion about scaling back bond purchases after releasing forecasts projecting a faster-than-anticipated pace of tightening.
Still, he appeared to throw some cold water on the market’s initial reaction to the dot plot revision, saying the central bank isn’t really thinking about rate increases right now. The Fed pledged to continue asset purchases at a $120 billion monthly pace until “substantial further progress" had been made on employment and inflation.
“The Fed finally had a ‘talking about talking about’ meeting, but financial markets seem confident the Fed already has a progress-dependent tapering plan in mind," said Edward Moya, a senior market analyst at Oanda.