Fed’s Jerome Powell hints at 50 basis point hike for May

SINGAPORE – Stocks in Asia-Pacific fell mostly on Friday as investors watched the market’s reaction to Chinese central bank governor Yi Gang’s comments as well as overnight comments from the president of the US Federal Reserve, Jerome Powell.

Mainland Chinese stocks were mixed, with the Shanghai composite rising 0.23% to 3,086.92 while the Shenzhen component fell 0.294% to 11,051.70.

China’s central bank will maintain a prudent monetary policy and increase support for the economy, Governor Yi Gang said on Friday as part of the annual Boao Forum for Asia. Yi said that the priority of China’s monetary policy is to ensure stable prices, especially in food and energy.

Yi’s comments come as investors have been watching for signs of political support from Chinese authorities. China’s markets have struggled for gains for most of this week as investors fret over a range of concerns, from the country’s economic outlook to an ongoing Covid outbreak on the mainland.

“From an investor point of view and especially from an equity point of view, words are great, but there has to be some meaning and there actually has to be some action,” Andrew Maynard, Managing Director and Head of Income Chinese Renaissance variable. he told CNBC’s “Street Signs Asia” on Friday.

“I think investors have gotten to the point where they are now…at a stage where we will wait and see. If something really materializes then China looks like a very attractive place once again, but until that actually happens I think we’re in this rut ​​and these downtrends are going to be around for a while yet,” Maynard said.

Hong Kong’s Hang Seng Index trimmed some losses after falling more than 2% earlier. It closed down 0.21% to 20,638.52, as shares in Chinese tech giants Tencent and Alibaba fell 2.13% and 1.42%, respectively.

Japan’s Nikkei 225 led losses among major markets in the region, falling 1.63% to close at 27,105.26, as shares in conglomerate SoftBank Group fell 3.01%. The Topix index lost 1.19% to 1,905.15.

South Korea’s Kospi ended the trading day down 0.86% at 2,704.71. Australian stocks fell as the S&P/ASX 200 fell 1.57% on the day to 7,473.30.

MSCI’s broader index of Asia-Pacific stocks outside of Japan fell 0.98%.

“I would say 50 basis points will be on the table for the May meeting,” Powell said. Following those comments, expectations for a 50 basis point move in May rose to 97.6%, according to CME Group’s FedWatch tool.

“The long of the short is: rates are going to go up, the Fed wants to keep pushing them hard and they’re going to keep pushing them until something breaks. The question is: what will break and when?” said Michael Every, global strategist at Rabobank.

US Treasury yields also rose on the back of Powell’s comments. The yield on the benchmark 10-year Treasury note, which started the year near 1.5%, last stood at 2.9336%.

Stocks on Wall Street fell overnight in the United States, with the S&P 500 falling about 1.48% to 4,393.66. The Dow Jones Industrial Average lost 368.03 points, or 1.05%, to 34,792.76. The tech-heavy Nasdaq Composite lagged, falling 2.07% to 13,174.65.

The US Dollar Index, which tracks the greenback against a basket of its peers, was at 100.908, once again above the 100 level below which it dipped briefly earlier this week.

The Japanese yen was trading at 128.06 per dollar, even weaker compared to levels below 126 seen last week against the dollar. The Australian dollar was at $0.731 after a recent drop from over $0.744.

Oil prices were lower in afternoon Asian trading hours, with international benchmark Brent crude futures down 0.76% at $107.51 a barrel. US crude futures slumped 0.74% to $103.02 a barrel.

— CNBC’s Evelyn Cheng and Jeff Cox contributed to this report.