# Marketmind: Rates start to bite Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-02-06 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Asian Stocks Brace for Recovery Amid Expected Interest Rate Meta Description: Asian markets face uncertainty as potential interest rate hike in Australia and comments from Fed Chair Powell loom, following recent market turmoil. URL: https://financedigest.com/marketmind-rates-start-to-bitehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-02-06t215331z2lynxmpej150zzrtroptp4usa-fed-stocks-1736814481107-compressed.jpg) By Jamie McGeever (Reuters) – A look at the day ahead in Asian markets from Jamie McGeever. Asian stocks on Tuesday come off the back of their worst day since June hoping for recovery, but vulnerable to an expected interest rate hike in Australia, potentially critical comments from Fed Chair Jerome Powell and deepening U.S.-Sino tensions. Another close in the red for [Wall Street](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved consumer confidence") on Monday won’t boost the likelihood of a rebound much either, as U.S. [markets lurch to price in a ‘higher for longer’ Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") this year. The pick of the Asian economic data and events calendar will be the Reserve [Bank of Australia’s rate](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") decision and subsequent guidance from policymakers. The RBA is expected to deliver a fourth consecutive quarter-point interest [rate hike](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") to 3.35%, after inflation unexpectedly rose last year to a 33-year high of 7.8%. However, figures on Monday showed retail sales are falling for the first [time in a year](https://www.financedigest.com/30-years-of-excel-lence-time-to-move-on.html "30 YEARS OF EXCEL-LENCE: TIME TO MOVE ON?"), a sign that higher rates are maybe starting to bite. In Japan, meanwhile, speculation on the [next Bank of Japan governor](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") is intensifying. According to the Nikkei newspaper, Japan’s [government has sounded out BOJ Deputy](https://www.financedigest.com/factbox-dominic-raab-returns-to-government-as-deputy-pm-under-sunak.html "Factbox-Dominic Raab returns to government as deputy PM under Sunak") Governor Masayoshi Amamiya to succeed Haruhiko Kuroda. Many analysts see him as a pragmatic policymaker who will prefer tip-toeing toward any exit from the [BOJ’s ultra-loose monetary policy](https://www.financedigest.com/yen-retreats-after-boj-policy-tweak-sparked-surge.html "Yen retreats after BOJ policy tweak sparked surge") rather than make sudden changes to a stimulus program he helped create. And the yen is on the slide. It fell 1% on Monday and is down 3% since Friday, its [biggest two-day fall](https://www.financedigest.com/dollar-set-for-biggest-two-day-fall-since-2009-as-rate-outlook-shifts.html "Dollar set for biggest two-day fall since 2009 as rate outlook shifts") in three years. ![](https://www.globalbankingandfinance.com/wp-content/uploads/2023/02/YEN2DAY.jpg) Yen vs [dollar 2-day change:](https://www.financedigest.com/stocks-dollar-little-changed-as-inflation-data-sends-mixed-signals.html "Stocks, dollar little changed as inflation data sends mixed signals") https://tmsnrt.rs/3jEdowD Generally speaking, [Asian markets](https://www.financedigest.com/the-asian-breast-implants-market-is-likely-to-scintillate-going-forward.html "The Asian Breast Implants Market is likely to scintillate going forward") are feeling the heat from the sudden U.S. interest [rate outlook shift following January’s freakishly strong](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") U.S. [jobs report](https://www.financedigest.com/global-shares-fall-on-pandemic-fears-ahead-of-jobs-report.html "Global shares fall on pandemic fears ahead of jobs report") released on Friday. The Fed’s implied [‘terminal’ rate](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") in June is now well above 5.00%, the implied year-end rate is higher than current the fed funds range, markets are now pricing in only 20 basis points of easing this year and the two-year yield has spiked around 40 basis points. This may be the tightening of financial conditions [Fed Chair Powell](https://www.financedigest.com/dollar-edges-lower-as-investors-wait-on-feds-powell.html "Dollar edges lower as investors wait on Fed’s Powell") and his colleagues are seeking. Or they may be irrational and unjustified [market swings in response to one data point that will prompt a response from Powell](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell") when he speaks at the Economic Club of Washington on Tuesday. The MSCI Asia ex-Japan index slumped 2.4% on Monday, its worst day since June last year, Chinese stocks had their worst day this year (blame Beijing-Washington tensions too) and [Hong Kong](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") tech stocks fell 3.6%. Here are three [key developments that could provide more direction to markets](https://www.financedigest.com/automotive-actuator-market-key-manufacturers-development-trends-and-competitive-analysis-2028.html "Automotive Actuator Market Key Manufacturers, Development Trends and Competitive Analysis 2028") on Tuesday: – Fed Chair Powell speaks (Economic Club of Washington) – Australia interest [rate decision](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") – [China FX reserves](https://www.financedigest.com/exclusive-u-s-asks-japan-china-others-to-consider-tapping-oil-reserves-sources.html "Exclusive-U.S. asks Japan, China, others to consider tapping oil reserves -sources") (January) (By Jamie McGeever; Editing by Josie Kao) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---