Asian markets experienced an uptick on Tuesday, primarily driven by a recovery in the previously struggling Chinese markets. However, global investors remained cautious due to diminishing hopes of an imminent Federal Reserve rate cut, supporting the strength of the dollar.
The Australian dollar saw a notable increase following the Reserve Bank of Australia’s decision to maintain a tightening bias during its policy meeting. The bank also warned against immediate rate cuts, aligning with the cautious stance echoed by the Federal Reserve.
The broader Asia-Pacific shares, excluding Japan, witnessed a reversal of the previous session’s 0.7% decline, posting a gain of more than 0.8%. This positive trend was supported by a significant surge in Chinese stocks, attributed to recent state-backed investor support and regulatory measures.
The Hang Seng Index in Hong Kong surged by more than 3%, while Japan’s Nikkei experienced a marginal decline of 0.22%.
The U.S. services sector displayed growth in January, contributing to doubts about the anticipated series of Federal Reserve rate cuts for the year. This skepticism was further fueled by the robust U.S. jobs report on Friday, maintaining the dollar’s strength against the euro and yen.
The Reserve Bank of Australia opted to keep interest rates unchanged, but hinted at the possibility of future increases, citing persistently high inflation. This move resulted in a 0.4% rise in the Australian dollar, with expectations of a delayed first easing later in the year.
Global market movements continued to be influenced by Federal Reserve expectations, with U.S. Treasury yields remaining elevated. Despite initial projections of significant rate cuts, market pricing now indicates a more conservative estimate, reflecting around 115 basis points of easing by the Fed this year.
Commodities, particularly oil prices, remained relatively stable as traders assessed U.S. Secretary of State Antony Blinken’s visit to the Middle East to discuss a ceasefire offer in the region. U.S. crude rose to $72.95 a barrel, while Brent futures gained to $78.18.
