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Asian stocks firm, take China Fitch downgrade in their stride

Asian stocks traded greater on Wednesday, unfazed by a score downgrade to China by Fitch which triggered a moderate domestic selloff however which analysts stated did not take into account the economy's future efficiency.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7%, after U.S. stocks ended the previous session with mild gains. The index is up 0.2% so far this month.

The yield on benchmark 10-year Treasury notes was at 4.3556% compared with its U.S. close of 4.366% on Tuesday. The two-year yield, which rises with traders' expectations of greater Fed fund rates, touched 4.7384%. compared to a U.S. close of 4.747%.

Fitch verified China's sovereign rating at 'A+' even. the outlook was reduced to unfavorable and it anticipated financial. growth this year would slow.

These downgrades reflect mainly the present cyclical. scenario in China, they are not forward looking. This implies. that as and when China's economy enhances, they will change. their rating outlook to positive, stated Chi Lo, BNP Paribas. Possession Management senior strategist. He added the Fitch relocation. followed a comparable call by Moody's in December.

China's blue chip CSI300 index was down 0.43%. after earlier opening flat while the Shanghai Composite. was down 0.34%. Hong Kong's Hang Seng Index left the. selling and was trading up 1.88%.

Australian shares were up 0.3%, while Japan's Nikkei. stock index was down 0.4%. The Nikkei is looking to test. 40,000 points again, with the yen's slide seen assisting fuel that. push.

However, further weakness in the Japanese currency could. prompt authorities to intervene, specifically if the yen breaks. 152 per dollar.

Market individuals will be on high alert for a potential. FX intervention from Japan's Ministry of Finance (MoF) today,. CBA financial experts stated. They added that a strong U.S. inflation. report would prompt dollar-yen to rally, which could lead the. Japanese government to start buying yen.

In Asian trade, the dollar rose 0.01% versus the yen to. 151.78. The currency is getting closer to its high this. year of 151.97 on March 27.

The European single currency was flat at $1.0856,. having actually acquired 0.64% in a month, while the dollar index,. which tracks the greenback versus a basket of currencies of. other major trading partners, was up at 104.14.

U.S. customer cost information due on Wednesday will be carefully. enjoyed by investors as they look for instructions on the next move in. rates of interest. The data is anticipated to reveal a rise in headline. inflation to 3.4% year-on-year, from 3.2% in February.

Markets are looking at the data to address one question: is. inflation sticky or is the disinflation development in line with. Fed's expectations?, ANZ's economic experts said.

We believe the information will suggest that inflation pressures are. waning gradually.

The prospect of a U.S. rate of interest cut as early as June is. now being considered by monetary markets, with the inflation. checking out seen as key to the central bank's next relocation.

The Fed funds futures market is currently pricing about a. 60% chance of a June cut. A strong core CPI of 0.3% for the. month or above can further dampen the case for a June rate cut,. pushing U.S. yields and the USD dramatically greater, said CBA. financial experts in a note.

However if the core CPI prints listed below 0.3% for the month, market. rates for a June cut might only rise modestly and the USD may. edge slightly lower.

In the U.S., the Dow Jones index completed down 0.02%,. the S&P 500 acquired 0.1%, while the Nasdaq Composite. rose 0.3%.

U.S. crude ticked up slightly to $85.34 a barrel. Brent crude rose to $89.52 per barrel.

Gold was somewhat higher. Area gold traded at. $ 2,352.93 per ounce.

(source: Reuters)