The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Asian equities are poised for a pullback on Thursday, following a broad decline in US markets and increasing caution in the bond market. Futures for share indexes in Japan, Australia, and Hong Kong dipped early Thursday, after the S&P 500 dropped 0.9% and the tech-heavy Nasdaq 100 fell 1.6% on Wednesday.
Meanwhile, the yen steadied after dropping to its lowest level against the dollar in nearly three months, amid fears of potential intervention by Japanese officials. The US 10-year Treasury yield rose, pushing the dollar higher as traders scaled back their expectations of Federal Reserve rate cuts.
Tesla's after-hours rally of 8% on robust earnings provided a silver lining for tech stocks, with an ETF tracking the Nasdaq 100 gaining 0.4% in post-market trading.
Bond yields in Australia also climbed early Thursday, mirroring movements in US treasuries, as concerns over the pace of rate reductions by the Fed grow. The term premium on 10-year US Treasury notes reached its highest level since November, reflecting investor demand for higher yields on long-term debt.
In currency markets, the yen traded around 152 per dollar early Thursday, while Canada’s loonie fell after the Bank of Canada accelerated its easing measures.
Elsewhere, Taiwan Semiconductor Manufacturing Co halted shipments to a client after discovering that chips made for that client ended up with Huawei Technologies, raising concerns over potential US sanctions violations.
Investors are watching key upcoming events, including big tech earnings, October's payrolls report, and the US election, followed by the Fed meeting, which could add further volatility to markets in the coming weeks.
Despite recent challenges, some analysts remain optimistic. Nicholas Colas at DataTrek Research noted that higher yields could be a positive sign for economic growth and corporate earnings in the near term.
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