♦ Dollar holds gains made after Fed downplayed slower 1Q growth
♦ Chances of Fed rate hike in June jump to 72 per cent
♦ European markets expected to open higher
♦ Asia stocks lower, after subdued Wall Street, Europe performance
♦ US House expected to vote on Obamacare repeal bill on Thursday
♦ Oil slips on smaller-than-expected US inventory decline
SINGAPORE: Asian stocks retreated on Thursday, taking their cues from a subdued session on Wall Street, while the dollar retained gains made after the Federal Reserve’s hawkish policy statement.
European markets looked more positive, with financial spreadbetters expecting Britain’s FTSE 100 and Germany’s DAX to open 0.2 per cent higher and France’s CAC 40 to start the day up 0.1 per cent.
At the end of its two-day meeting, the Fed kept its benchmark interest rate steady, as expected, but downplayed weak first-quarter economic growth and emphasised the strength of the labour market, a sign it was still on track for two more rate increases this year.
Futures traders are now pricing in a 72 per cent chance of a June rate hike, from 63 per cent before the Fed’s statement, according to the CME Group’s FedWatch Tool.
The dollar stood at 112.765 yen, slightly higher than Wednesday and at its strongest level since March 20.
The dollar index, which tracks the greenback against a basket of trade-weighted peers, climbed 0.1 per cent to 99.309, building on Wednesday’s 0.2 per cent jump.
“The key over the coming weeks will be the economic data from the US but, in addition, the (Fed) will be closely watching Washington and negotiations surrounding the new administration’s tax cut plans,” said Lee Ferridge, head of multi-asset strategy for North America at State Street Global Markets.
“Should the data hold up (or better still, improve from here), while the chances of a late summer tax cut agreement remain intact, then the market will likely price in a June move.”
Attention now turns to US non-farm payrolls for March, due on Friday, after separate data showed private employers added 177,000 jobs in April. That was higher than expected but the smallest increase since October.
Economists polled by Reuters expect US private payroll employment likely grew by 185,000 jobs in April, up from 89,000 in March.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.4 per cent on Thursday, dragged lower by commodities, energy and financials stocks. Japan is closed for the Golden Week holiday.
Chinese stocks pared earlier losses to trade flat, as gains in small-caps offset a cooling in China’s services sector growth to its slowest in almost a year in April as fears of slower economic growth dented business confidence.
Hong Kong’s Hang Seng dropped 0.4 per cent.
Australian shares were also 0.4 per cent lower.
“May is a notoriously cruel month for Asia with foreign exchange, equities and domestic bonds all losing in historical average returns,” Bank of America Merrill Lynch strategists led by Claudio Piron wrote in a note.
South Korea’s KOSPI bucked the weaker trend, jumping 0.7 per cent and hovering just a touch below an all-time high hit earlier in the session on strong corporate earnings.
Rising exports point to continued profit growth in the second quarter, with sentiment supported by hopes for economic stimulus from a new president.
Overnight, Wall Street closed flat to lower.
The Nasdaq fell 0.4 per cent as Apple shares slid after reporting lower than expected iPhone sales on Tuesday.
Facebook and Tesla also dropped during the session and after hours despite upbeat quarterly results, also weighed on the index.
— Reuters
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