HONG KONG, Jan 4: Asian markets continued their disappointing start to the year Thursday, tracking another loss on Wall Street after minutes from the Federal Reserves December meeting dampened hopes for an early interest rate cut.
And oil prices built on their previous days rally after deadly blasts in Iran that Tehran described as a "terrorist attack" fanned geopolitical fears and added to already high tensions in the Middle East.
The global rally that characterised the last months of 2023 has petered out at the start of the new year owing to worries the buying may have run a little ahead of itself, leading traders to take a breather.
The selling pressure was enhanced Wednesday when the Fed minutes showed officials expect to keep rates elevated for some time as they want to make sure they have inflation under control.
That dealt a blow to confidence on trading floors, where investors had been betting on a cut as soon as March after the banks post-meeting statement last month showed they envisioned three reductions in 2024.
"Participants viewed the policy rate as likely at or near its peak for this tightening cycle," the minutes said, adding there was growing optimism among decision-makers that there was "clear progress" on inflation, which continues to fall.
Officials were keen to begin cutting this year but gave no indication of when.
Still, data Wednesday provided fresh evidence that policymakers measures were kicking in but not enough to send the economy into a recession, with job openings falling in December, while the factory sector remained in contraction.
Focus now turns to the release of key non-farm payrolls data due on Friday.
"Overall, the labour market remains strong, but demand is cooling, coming into better balance with supply," said Rubeela Farooqi at High Frequency Economics.
"These data will be welcome news for policymakers and support the Feds view that the next move in rates will be lower, likely in the second quarter."
And Laura Rosner-Warburton, of Macropolicy Perspectives, added: "What December taught us is they are willing to pivot."
Meanwhile, Richmond Fed boss Tom Barkin said the likelihood of a so-called soft landing was "increasingly conceivable but in no way inevitable".
Wall Streets three main indexes all fell, with the Nasdaq down more than one percent as tech firms continue to retreat after a strong advance in recent weeks. —AFP
