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Marketmind:'Melt up' as Fed accelerates pivot

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Marketmind:'Melt up' as Fed accelerates pivot
Reuters
Jamie McGeever
December 13, 2023

By Jamie McGeever

(Reuters) - A look at the day ahead in Asian markets.

Asian markets are poised for lift off on Thursday, fueled by the dovish tilt from the Federal Reserve's final policy meeting of the year which lifted Wall Street - the Dow surged to a fresh all-time high - and slammed Treasury yields and the dollar.

The Fed kept its key fed funds target range unchanged at 5.25% to 5.50%, as expected, so the real meat for inventors was in the revised Staff Economic Projections and Chair Jerome Powell's press conference.

In short, the pivot toward cutting rates next year was clearer than markets had priced - Fed officials' median rate outlook for the end of 2024 is now 50 basis points lower than it was three months ago.

Rates futures markets quickly moved to price in a near certain probability that the first move will be a quarter point cut as early as March. The two-year yield plunged more than 25 basis points and the 10-year yield sank as low as 4% - both at their lowest level in months.

There's every chance that the 'melt up' in stocks and bonds spills over into Asian markets on Thursday - emerging market assets trading late on Wednesday, like Brazilian and Mexican equities and currencies, rose sharply.

Investors in Asia on Thursday also have plenty of local news and events to digest, including central bank policy meetings from the Philippines and Taiwan, Indian wholesale inflation figures, Australian unemployment and New Zealand GDP.

Economists polled by Reuters expect the Philippine central bank to keep rates on hold at 6.50% through the first half of next year, and begin easing policy in the third quarter.

Taiwan's central bank, meanwhile, is expected to leave its policy rate unchanged at 1.875% for all of next year, only beginning its easing cycle in the first quarter of 2025.

Economic growth in New Zealand likely slowed significantly in the third quarter, according to a Reuters poll, while figures are expected to show a sharp slowdown in job growth in Australia in November with the unemployment rate inching up to 3.8% from 3.7%.

The annual rate of wholesale price inflation in India, meanwhile, is expected to have climbed to 0.08% last month from -0.52% in October.

If any Asian country's markets could do with a bit of relief, it is China, where stocks tanked on Wednesday after investors gave a clear thumbs down to proposals and pledges from Chinese leaders gathered in Beijing to boost the economy and fight off deflation.

The CSI 300 index of blue chip shares fell 1.7%, its fifth biggest fall this year, and the benchmark Shanghai index also fell more than 1%.

Here are key developments that could provide more direction to markets on Thursday:

- Philippines interest rate decision

- New Zealand GDP (Q3)

- Australia unemployment (November)

(By Jamie McGeever; Editing by Josie Kao)

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