Asian stocks went down on Friday and looked like they were going to lose for a second week in a row. The dollar went up because strong U.S. data brought back worries that the Federal Reserve will have to keep its “hawkish” stance to keep inflation in check.
MSCI’s broadest index of Asia-Pacific shares outside of Japan fell by 1%, ending a two-day winning streak. The S&P/ASX 200 index in Australia and the Nikkei index in Japan both fell by 1%.
Weekly data on U.S. jobless claims showed that the job market was still tight and that the U.S. economy came back faster than expected in the third quarter.
Related: The Nikkei falls more as Asian stocks react to a change in BOJ policy.
Tony Sycamore, a market analyst at IG, said that the data “stoked fears that more monetary policy tightening will be needed in 2023 to cool inflation.”
In particular, investors are worried that the Fed Funds target rate could go up and stay there for longer than expected, which could cause the economy to slow down.
Futures for European stocks showed that they were going to go up. The Eurostoxx 50 futures went up 0.44 percent, the German DAX futures went up 0.48 percent, and the FTSE futures went up 0.20 percent.
Now, the market will focus on the U.S. personal consumption expenditures (PCE) data, which is due out later on Friday and will give more information about whether inflation is still going down or not. Economists polled by Reuters think that the core PCE price index will rise 0.2% in November and 4.7% in the year leading up to November.
Tom Lee, head of research at Fundstrat Global Advisors, said that Friday could be a big day for the markets. He also said that if PCE inflation came in lower than expected, it could make the Fed less likely to raise interest rates in the future.
This month, the U.S. central bank raised interest rates by 50 basis points after raising them four times this year by 75 basis points each time. Chair Jerome Powell has said that the Fed will raise rates again in 2023, even though the economy is heading toward a recession.
China stocks didn’t change much, but Hong Kong stocks went down. This is because China is dealing with a rise in COVID-19 infections after Beijing got rid of its strict “zero-COVID” policy to control the virus.
On the currency market, the Japanese yen lost 0.26 percent of its value against the dollar, making it worth 132.70 dollars. After the central bank surprised the markets on Tuesday by changing its policy on government bonds, it is still on track for its third largest weekly gain of more than 3% this year.
Mizuho analysts said that investors should be ready for the yen to rise quickly against the dollar once the market sees that monetary policy in Japan and the U.S. has changed.
The yen went up after the Bank of Japan made an unexpected change on Tuesday to let the 10-year bond yield move 50 basis points on either side of its 0% target, which is more than the 25 basis point range it had before.
Japan’s core consumer inflation hit a new 40-year high of 3.7% in November, as companies continued to pass on rising costs to households. This makes it hard for the BOJ to believe that recent cost-push inflation will only last for a short time.
The latest inflation numbers are likely to keep the market from giving up on the idea that the central bank will cut back on its massive stimulus even more next year.
Related: Asian stocks fall as the BOJ makes a surprise policy change that makes the yen go up.
The dollar index, which compares the value of the dollar to those of six other currencies, went up by 0.01% to 104.39. At $1.0603, the euro was up 0.09 percent. Last time I looked, the price of sterling was at $1.2032, which was down 0.09% for the day.
In the meantime, oil prices went up because people thought that Russia would export less crude oil from the Baltic region in December. [O/R]
U.S. crude went up by 1.02% to $78.28 per barrel, and Brent went up by 0.86% to $81.68 per barrel.
