Asian shares battle, $US soars on lowered rate cut bets
US Treasury yields ticked to the highest in more than a month, lifting the dollar against the yen in particular.
However, tech shares remained resilient following a four per cent rally in artificial-intelligence darling Nvidia overnight.
Brent crude continued to hover around $US69 per barrel.
Data on Tuesday showed US consumer prices rose 0.3 per cent in June, in line with forecasts, but the largest gain since January. Economists attributed the rise in prices across goods such as coffee and home furnishings to the Trump administration's escalating import tariffs.
The Fed has been keeping interest rates steady as it has waited for indications of the inflationary impact from tariffs, which Chair Jerome Powell had said he expected in the summer.
"We know the revealed preference of Fed Chair Powell, along with a few of his colleagues, is to wait for these tariff impacts to come through, and those in that camp are seeing that view bolstered by this data," Taylor Nugent, senior economist at National Australia Bank, said in a podcast.
As a result, markets saw "a fairly significant trimming of Fed expectations" for rate cuts, Nugent said.
Traders currently price in 43 basis points of rate reductions for the rest of this year, with 56.5 per cent odds of a quarter-point cut in September.
Investors will now carefully monitor producer price data due later on Wednesday, looking for signs of whether inflationary pressures are also building on the factory floor.
In Asia, Australia's benchmark S&P/ASX 200 and South Korea's KOSPI each lost around 0.6 per cent in trading on Wednesday. Mainland Chinese blue chips slipped 0.1 per cent.
Japan's tech and exporter-heavy Nikkei index was flat after alternating between small gains and losses, supported by both Nvidia's fortunes and the weak yen.
Taiwan's benchmark added 0.5 per cent and Hong Kong's Hang Seng jumped 0.8 per cent, adding to Tuesday's 1.6 per cent tech-driven rally.
US S&P 500 futures eased 0.2 per cent, after a 0.4 per cent decline for the cash index overnight.
Beyond the Fed and US President Donald Trump's tariffs, the earnings season is another focal point for investors.
Results from JPMorgan Chase and Citigroup beat expectations, but were met with a mixed market response. Wells Fargo cut its 2025 net interest income guidance even as it beat second-quarter profit expectations.
Bank earnings due on Wednesday include Goldman Sachs, Morgan Stanley and Bank of America.
US 10-year Treasury yields rose as high as 4.495 per cent on Wednesday, the highest since June 11.
The dollar stuck close to a multi-week high against major peers. The dollar index was little changed at 98.545 after rising as high as 98.699 on Tuesday for the first time since June 23.
The US currency was steady at 148.785 yen, and earlier rose to 149.04 for the first time since April 3, in the aftermath of Trump's "Liberation Day" tariff announcement.
The euro edged up 0.1 per cent to $US1.1612, trying to pull away from Tuesday's three-week low of $US1.1593.
Cryptocurrency bitcoin added about one per cent to $US117,696, as it stabilised following its six per cent pullback earlier this week from Monday's all-time high at $US123,153.22.
Gold added 0.3 per cent to around $US3,332.
Brent crude futures fell five cents to $US69.16 a barrel, while US West Texas Intermediate crude futures declined nine cents to $US66.89 a barrel. Both contracts settled more than $US1 lower in the previous session.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Age
an hour ago
- The Age
Trump's misguided wars are starting to hurt the American people
The US sharemarket, which fell 0.4 per cent, and US bond yields, which rose, say that investors understood the data better than Bessent or his president. The odds on an early rate cut from the Fed have been lengthened, not shortened, by the data. Bessent should know better than to claim victory at this point in the rollout of Trump's tariffs, given his central role in that process. While some tariffs were announced in February and Trump's 'Liberation Day' baseline and 'reciprocal' tariffs on April 2, most of those tariffs were deferred for 90 days until July 9 and then, again, until August 1. They're not even in place yet and, given Trump's history – what Wall Street has dubbed the 'TACO' trade, or 'Trump Always Chicken out' – there is no certainty that they will be on August 1. Given that US importers started front-loading their inventories in anticipation of the tariffs and continue to do so – they'll have had at least four or five months to build their stocks before the bulk of the more punitive tariffs cut in next month, assuming they aren't deferred again – the full impact of Trump's trade war on the rest of the world won't be known until, at the earliest, late this year. Apart from the stockpiling, it can take a month from the point importers are ordered to ship goods from Asia to the US, and goods shipped before the tariffs come into effect are exempt from them. There are a lot of lags, some of them now considerable, before tariffs announced in April actually flow through to consumer prices and the inflation rate. Separate to the reciprocal tariffs, the 30 per cent rate Trump has threatened to impose on imports from the European Union and Mexico, the 50 per cent tariff on Brazil, the 50 per cent tariff on copper and more sectoral tariffs on pharmaceuticals, timber and semiconductors are also yet to come. The Yale Budget Lab says that, once those tariffs announced so far are implemented, including the tariffs on the EU and Mexico, the overall effective average tariff rate will be 20.6 per cent, the highest since 1910. Prices would rise by 2.1 per cent in the near term, equivalent to an average per-household loss of income of $US2800 (about $4300). The Yale researchers also say that the tariffs announced to date will raise $US2.5 trillion through to 2035. While Trump repeatedly (and falsely) claims that the revenue is coming from the exporting countries, Goldman Sachs economists says US consumers will end up paying about 70 per cent of the increased costs to importers. Loading The exporters might shave their margins, as might the importing companies who actually pay the increased customs duties when the goods pass through the US border, but the overwhelming majority of the cost of Trump's tariffs will be a tax on US households' consumption. That's why Trump's claim that his tariffs will raise billions of revenue (which they will), while having no impact on inflation or the economy (they will have an impact) only makes sense if you believe him when he says the exporters will pay the tariffs (which they won't). The Yale Budget Lab says the tariffs to date will reduce US GDP by 0.9 percentage points initially and 0.5 percentage points thereafter, or about $US135 billion a year in 2025 dollars. Higher inflation rates and lower economic growth equates to stagflation, which would be the Fed's worst nightmare. It would be forced to either target the inflation rate with higher interest rates or rising unemployment with lower rates but even higher inflation. That's why, despite Trump's verbal assaults on the Fed and its chair, Jerome Powell, the Fed is sitting on its hands and will continue to do so until there is a clearer picture of the likely effects of the tariffs. Trump and the Republicans have been stepping up their attacks on Powell, with the director of Trump's national economic advisers, Kevin Hassett, saying this week that the administration is still looking for the grounds to fire him. Trump really wants a rate cut. Republicans have seized on costs blowouts in the renovation of the Fed's ageing and asbestos-riddled Washington headquarters to target Powell and to try to develop the grounds to fire him 'for cause,' the only legitimate way a Fed chair can be removed. Bessent, who says the administration has started a formal process to identify Powell's successor when his term as chair expires next May, also says Powell should step down as a Fed governor at that point. His term as a board member doesn't end until 2028. The administration's current strategy appears to be that it will appoint a chair-elect in January, when term of another governor, Adriana Kugler, ends. That would undermine Powell's authority before he vacates the chair, although it might also see the incoming chair isolated by the rest of the board. Those sectors that are most tariff-exposed – fresh fruit and vegetables, household appliances and furniture, toys, clothing and sporting goods – all experienced prices increases. Trump has made it clear that a precondition of the new chair's appointment will be their willingness to lower rates, with the most likely candidates – Hassett, Bessent, former governor Kevin Warsh and current governor Christopher Waller – all currently auditioning for the role by trying to demonstrate their rate-cutting credentials. If, as the new chair takes Powell's seat at the Fed's board table, inflation is spiking because of Trump's tariffs, the Fed will be in an invidious position, with its independence and credibility – and the stability of America's bond and sharemarkets and its currency – at risk if it doesn't respond with higher rates.
Sydney Morning Herald
4 hours ago
- Sydney Morning Herald
Labor and Coalition in lockstep as Trump threatens to pull pharma tariffs forward
US President Donald Trump's threat to bring forward planned tariffs of up to 200 per cent on pharmaceuticals by a year to the end of the month has united Labor and the Coalition in their defence of the Pharmaceutical Benefits Scheme. The announcement comes as a blow to Australia's third-largest export to the United States, worth $2.2 billion last year, with the ASX suffering its biggest single-day fall since May. Speaking from Washington on Tuesday (Wednesday AEST), Trump said he was intending to have tariffs 'probably at the end of the month', although when the suggested 200 per cent tariff would be enforced is unclear. 'We're going to start off with a low tariff and give the pharmaceutical companies a year or so to build, and then we're going to make it a very high tariff,' he told reporters. Jim Chalmers and Prime Minister Anthony Albanese are overseas but a government spokesperson pointed to the treasurer's remarks last week describing the Australian pharmaceutical industry as 'exposed' but declaring the government would defend the PBS. Loading 'Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on. That won't change,' Chalmers told Radio National last Wednesday when Trump first mentioned the 200 per cent figure. 'We see the PBS as a fundamental part of healthcare in Australia. We're not willing to compromise the PBS. We're not willing to negotiate or trade away what is a really important feature of the health system.' Opposition spokesman for trade Kevin Hogan said on Wednesday that the Coalition intended to work with the government in a bipartisan manner to safeguard the PBS.
The Age
4 hours ago
- The Age
Labor and Coalition in lockstep as Trump threatens to pull pharma tariffs forward
US President Donald Trump's threat to bring forward planned tariffs of up to 200 per cent on pharmaceuticals by a year to the end of the month has united Labor and the Coalition in their defence of the Pharmaceutical Benefits Scheme. The announcement comes as a blow to Australia's third-largest export to the United States, worth $2.2 billion last year, with the ASX suffering its biggest single-day fall since May. Speaking from Washington on Tuesday (Wednesday AEST), Trump said he was intending to have tariffs 'probably at the end of the month', although when the suggested 200 per cent tariff would be enforced is unclear. 'We're going to start off with a low tariff and give the pharmaceutical companies a year or so to build, and then we're going to make it a very high tariff,' he told reporters. Jim Chalmers and Prime Minister Anthony Albanese are overseas but a government spokesperson pointed to the treasurer's remarks last week describing the Australian pharmaceutical industry as 'exposed' but declaring the government would defend the PBS. Loading 'Our Pharmaceutical Benefits Scheme is not something that we're willing to trade away or do deals on. That won't change,' Chalmers told Radio National last Wednesday when Trump first mentioned the 200 per cent figure. 'We see the PBS as a fundamental part of healthcare in Australia. We're not willing to compromise the PBS. We're not willing to negotiate or trade away what is a really important feature of the health system.' Opposition spokesman for trade Kevin Hogan said on Wednesday that the Coalition intended to work with the government in a bipartisan manner to safeguard the PBS.
