Asia stocks ease as central banks play game of patience


SINGAPORE: Several Asian share benchmarks fell on Thursday as markets digested the implications of policymakers in major economies preferring to take a patient approach to monetary easing amid sticky inflation.

Geopolitical tensions were also at the forefront of investors' minds as China's military started two days of "punishment" drills held in five areas around Taiwan just days after new Taiwan President Lai Ching-te took office.

That sent Chinese blue chips falling 0.9%, while Hong Kong's Hang Seng Index similarly slid 1.4%.

In the broader market, MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.26%, while Australia's S&P/ASX 200 index lost 0.5%, also hurt by a pullback in some commodity prices.

More hawkish-than-expected minutes of the Federal Reserve's latest policy meeting, a hot UK inflation print and a sobering assessment of New Zealand's inflation problems from the country's central bank have caused investors to pare their bets of the pace and scale of global rate cuts expected this year.

"One thing that's interesting from the last 24 hours that can be taken away is still the uncertainty from central banks about policy settings and at what levels interest rates have to be at, and where they need to potentially stay at, in order to tame inflation," said Kyle Rodda, senior financial market analyst at Capital.com.

"That's causing uncertainty from a policy point of view, but it's obviously also causing uncertainty from a market point of view."

U.S. stock futures meanwhile received a boost after AI darling Nvidia forecast quarterly revenue above estimates after the bell on Wednesday, which sent its shares jumping 5.9% in extended trade.

S&P 500 futures tacked on 0.6%, while Nasdaq futures surged 0.95%.

EUROSTOXX 50 futures inched up 0.38%.

Taiwan's tech-heavy stock benchmark similarly scaled a record peak and last traded 0.25% higher, while the MSCI Asia Pacific ex-Japan IT stocks index touched an over two-year high.

Japan's Nikkei jumped 1.2%, drawing some support from a weaker yen that touched its lowest level in over three weeks. The yen was last at 156.70 per dollar.

Sterling and the kiwi held near two-month highs and last bought $1.2729 and $0.61195, respectively.

Data on Wednesday showed inflation in Britain eased less than expected and a key core measure of prices barely dropped, prompting investors to pull bets on a Bank of England rate cut next month.

Earlier that day, the Reserve Bank of New Zealand wrongfooted markets by warning cuts were unlikely until far into 2025 at the conclusion of its policy meeting where it held its cash rate steady as expected.

"There are still 'hard yards' to be done to bring annual CPI inflation down to the 2% target midpoint in a timely and sustainable manner, and thus monetary policy easing remains unlikely this year," said Kelly Eckhold, Westpac chief economist for New Zealand.

"Our baseline view remains that the first 25bp policy easing will occur in February next year, to be followed by a series of gradual (once a quarter) 25bp reductions that will eventually lower the OCR to around 3.75% in 2026."

In commodities, gold dipped 0.2% to $2,372.93 an ounce, away from its record high of $2,449.89 hit on Monday, as the prospect of higher-for-longer U.S. rates took some shine off the yellow metal.

Oil prices likewise fell, with brent crude down 0.56% to $81.44 a barrel, while U.S. crude edged 0.7% lower to $77.03 per barrel. - Reuters

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