Asian shares saw a decline on Thursday, and the dollar approached a three-week high as traders scaled back expectations of early and significant rate cuts this year. The minutes from the Federal Reserve’s last meeting provided limited insights into the timing of potential U.S. rate cuts. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.17%, marking the third consecutive day of losses. Japan’s Nikkei also slipped 0.5% on its first trading day of the year.
In Europe, futures indicated a mixed opening for markets, with Eurostoxx 50 futures down 0.04%, German DAX futures easing 0.07%, and FTSE futures adding 0.08%. The minutes from the Fed’s December meeting revealed a sense among policymakers that inflation was under control, raising concerns about the risks of an “overly restrictive” monetary policy on the economy.
Market participants have adjusted their expectations for rate cuts, with the probability of a Fed rate cut in March decreasing from 90% to 70%. Goldman Sachs analysts, however, still anticipate the first rate cut in March and a total of five cuts in the year, describing the comments in the minutes as dovish.
The focus now shifts to the U.S. nonfarm payrolls report scheduled for Friday to provide further insights into the labor market. China stocks remained under pressure, and uncertainties about the country’s economic recovery kept investors cautious. The private-sector survey in China showed that services activity expanded in December at the fastest pace in five months, contrasting with an official survey indicating a contraction in services activity at the end of 2023.
In the currency market, the dollar maintained its strong start to the year, with the dollar index up 0.068% at 102.47. Against the yen, the dollar hovered near a two-week peak at 143.76 yen. U.S. crude rose 0.91% to $73.36 per barrel, and Brent was at $78.78, up 0.68%, as concerns about disruptions at Libya’s top oilfield and Middle East tensions fueled fears of global oil supply disruptions. Spot gold added 0.1% to $2,043.09 an ounce after touching its lowest since December 21 on Wednesday.