Following a record-breaking Wall Street close, Asian markets were neutral on Monday. Meanwhile, Federal Reserve officials attempting to temper investor expectations delivered a fresh blow to prospects for an early US interest rate decrease.
Thanks to wagers on lower borrowing costs this year, a wave of tech giants including Apple, Amazon, Nvidia, and Facebook parent Meta drove the S&P 500 to its first fresh all-time high since early 2022.
A widely followed University of Michigan study that revealed a spike in consumer confidence and optimism about declining inflation contributed to the rise.
However, analysts warned that traders may have run a little ahead of themselves at the end of last year as they forecast the Fed will cut rates up to six times before December, with the first coming in March.
A string of data in recent weeks has shown inflation remains sticky and well above the bank’s two percent target, while the jobs market continues to show resilience despite borrowing costs sitting at two-decade highs.
Minutes from the Fed’s most recent meeting also showed decision-makers were happy to keep monetary policy tight until they are confident prices are under control.
On Friday, San Francisco Fed boss Mary Daly said it was likely too early to think of moving just yet.
“While I think it’s appropriate for us to look forward and ask when would policy adjustments be necessary so we don’t put a stranglehold on the economy, it’s really premature to think that that’s around the corner,” she told Fox Business on Friday.
“Do I get consistent evidence that inflation is coming down, or do I get any early signs with the labour market starting to falter?
“Neither one of those right now is pushing me to think that an adjustment is necessary.”
While he was willing to change his mind, Atlanta Fed chief Raphael Bostic said he did not foresee a change until the third quarter. Austan Goolsbee, the chief of the Chicago Fed, concurred, saying that decisions were “fundamentally about the data.”
According to Bloomberg News, the likelihood of a cut before the end of the first quarter dropped last week to less than 50% from around 80% the week before.
Tokyo emerged victorious once more, maintaining its remarkable start to the year with the help of a declining yen and increasing inflation in Japan. Later in the week, traders are anticipating a Bank of Japan policy announcement.
Sydney, Taipei, Manila and Wellington also rose.
However, Shanghai and Hong Kong continued their painful start to the year caused by ongoing weakness in China’s economy and a lack of measures from authorities aimed at kickstarting growth.
Seoul, Singapore, Jakarta and Bangkok also fell.
Oil prices retreated again as Middle East tensions were overshadowed by worries over the global outlook and after the International Energy Agency warned demand growth would halve in 2024.
