Asian equities are wary as US bombings in Yemen cause oil prices to soar

Asian equities are wary as US bombings in Yemen cause oil prices to soar

Asian equities are wary as US bombings in Yemen cause oil prices to soar

Christine Lagarde, the president of the European Central Bank (ECB), made dovish remarks that may have contributed to the rate increase. She said that rate cuts would occur only once it was assured that inflation had reached the 2% mark.

As the fighting in the Red Sea area intensified and oil prices rose, investors' expectations for rapid rate reduction in the US and Europe were tempered by somewhat higher-than-expected US inflation data on Friday, Asian equities remained cautious.

Christine Lagarde, the president of the European Central Bank (ECB), made dovish remarks that may have contributed to the rate increase. She said that rate cuts would occur only once it was assured that inflation had reached the 2% mark.

Breaking: Following the Houthi organization's assault on foreign ships in the Red Sea, the United States and Britain have started attacking targets in Yemen that are associated with the group. US West Texas Intermediate (WTI) oil increased 2.1% to $73.53, while Brent futures surged 2% to $78.95 a barrel.

Stocks have been volatile due to the Red Sea dispute that is becoming worse. The MSCI broadest index of Asia-Pacific equities outside of Japan saw a 0.1% decline, while the Nikkei in Japan gained 1.2% to a 34-year high as a result of the lower yen.

According to figures on inflation, China's economic recovery remained sluggish in December, with the consumer price index down 0.3% from the previous year. Consumer inflation for the whole year of 2023 was 0.2%, which was less than the government goal of around 3%.

Blue chips in China decreased by 0.3%. Also down 0.3% was the Hang Seng index for Hong Kong.

Following data showing U.S. consumer prices grew more than anticipated in December, Wall Street recovered previous dips and was relatively stable on the day. The carefully watched key metric came in slightly above expectations. Had been.

Although the core US inflation data came in somewhat better than anticipated, Andrew Lilley, chief rates strategist at Barrenjoy, noted that this did not portend a good reading on PCE, the Fed's favored inflation measure.

He said, "Additionally, the Fed speakers we talked to last night all appeared more dovish than previously and ... we didn't hear as a strong opposition to the concept of a March reduction from everyone who spoke." " ,

Richmond Fed President Thomas Barkin stated that although the inflation statistics provided few fresh insights for Fed policymakers, it did nothing to provide light on the direction of inflation.

While Cleveland Fed President Loretta Mester said that a rate decrease in March "is within my estimation," Chicago Fed President Austin Goolsby expressed doubt that the data showed sufficient improvement for the Fed to begin reducing rates. In his words, it was "very early".

Futures wagers on a March interest rate reduction added 73% likelihood, up from 68% the day before. Compared to the Federal Reserve's dot plot of 75 basis points, they are pricing in a discount of almost 150 basis points this year.

"Lagarde opposes the concept of (rate reduction) in a similar manner. Thus, the market is beginning to press for the timing of those cutbacks as soon as Lagarde reversed course, and she did so last night. said Lily.

Overnight, Euribor money market futures increased by up to 10 basis points. With a 30% possibility of a 50bp decrease, the swap has completely moved in value to a quarter-point rate drop in April, for a total rate cut of 148bps for the year.

Following the rise, Treasuries in Asia were flat, driven mostly by the short end of the curve. Asia's two-year rates were at 4.2639%, down 11 basis points from the previous day, while the 10-year yields were almost unchanged at 3.9828%, down 5 basis points from the previous day.

Despite somewhat better-than-expected US inflation figures, the dollar failed to gain traction in the foreign currency market. The dollar index, which closed the previous day marginally lower than its main counterparts, was little changed at 102.29.