The US Federal Reserve Chairman pushed short-term Treasury yields higher, sending Wall Street and European stocks lower.
Asian stocks stabilized after a week of sharp losses, buoyed by better-than-expected Chinese retail sales data for October, a positive sign for consumer spending, even as other indicators missed expectations.
In addition, Fed Chairman Jerome Powell stressed that there is no need to rush to cut interest rates as the economy is still growing. The job market is strong and inflation remains above the 2% target, reducing expectations for a rate cut next month.
Fed rate futures fell sharply, with a 7 basis point cut in December and now projecting only a 71 basis point cut by the end of 2025. The odds of a rate cut next month are now slim, with a 61% probability.
This pushed the US dollar higher across all currencies, especially against the euro. Expectations of more aggressive policy easing in Europe continued to weaken the currency, which is trading at a one-year low.
Many forecast the Fed could slow its easing earlier, as early as its December or January meetings, while JPMorgan still expects the Fed to cut in December.
“Market expectations following the boost from Donald Trump’s election and the subsequent impact on corporate earnings expectations are now being weighed down by the huge uncertainty around interest rates, especially next year,” said Kyle Rodda, senior analyst at Capital.com.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.2% but was still down 4.3% for the week, its biggest weekly decline in more than two years.
The regional health care index fell 1% after U.S. President-elect Donald Trump nominated Robert F. Kennedy Jr., a known vaccine skeptic, to head the top U.S. health agency.
Tokyo's Nikkei (.N225) rose 0.7 percent, helped by a weaker yen that has improved prospects for Japanese exporters. Still, the index was down 1.7 percent for the week.
The US dollar rose for a fifth straight day against the yen, adding 0.2% to 156.51, its highest since July.
