Asia stocks slip, dollar supported after Yellen’s rate hike comments

By: | Published: December 3, 2015 7:21 AM

Asia stocks slipped and the dollar advanced on Thursday after hawkish-sounding comments from Federal Reserve Chair Janet Yellen further reinforced the case for an interest rate hike later this month.

Global stock marketAsia stocks slipped and the dollar advanced on Thursday after hawkish-sounding comments from Federal Reserve Chair Janet Yellen further reinforced the case for an interest rate hike later this month. (AP)

Asia stocks slipped and the dollar advanced on Thursday after hawkish-sounding comments from Federal Reserve Chair Janet Yellen further reinforced the case for an interest rate hike later this month.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 percent, taking an early lead from Wall Street. The Dow shed 0.9 percent and the S&P 500 lost 1.1 percent overnight on Yellen’s comments and falling crude prices that hit energy shares.

Japan’s Nikkei lost 0.2 percent and Australian shares fell 0.5 percent.

Yellen said on Wednesday she was “looking forward” to a U.S. interest rate hike that will be seen as a testament to the economy’s recovery from recession.

Yellen’s comments came at a time when expectations for Fed deciding to hike rates at its Dec. 15-16 policy meeting had been slightly shaken by poor manufacturing data released earlier in the week.

Faith in the U.S. economy was partially restored after Wednesday’s ADP data showed U.S. private employers added a larger-than-expected 217,000 jobs in November.

The dollar index, a gauge of the greenback’s strength against a basket of key currencies, advanced to a 12-1/2-year high of 100.51 in light of Yellen’s comments and the upbeat U.S. data. It last stood at 100.02.

The euro was little changed at $1.0610 after dipping 0.2 percent overnight. The markets were braced for the European Central Bank potentially delivering long-expected monetary easing measures later in the session.

“There is great potential for euro volatility as the ECB announces its policy decision, followed by the press conference by President (Mario) Draghi starting 45 minutes later,” wrote Sean Callow, a senior strategist at Westpac.

“Draghi and selected colleagues have clearly signalled that there is sufficient risk of undershooting the ECB’s inflation target to warrant further loosening of monetary settings.”

Fighting stubbornly low inflation, the ECB is expected to deliver a variety of measures on Thursday that could include a deposit rate cut and changes to its asset-buying programme.

While the prospects of further ECB easing dogged the euro, prospects of added stimulus have been a boon to European stocks. The pan-European FTSEurofirst 300 index hovered near a 3-month high touched earlier in the week.

In commodities, crude oil prices bounced modestly on bargain hunting following a sharp fall overnight prompted by surging U.S. stockpiles and the dollar’s bounce.

U.S. crude was up 0.6 percent at $40.17 a barrel after tumbling 4 percent overnight.

The bounce in crude was capped, with the Organization of the Petroleum Exporting Countries (OPEC) widely expected not to opt for a production cut when it meets on Friday, despite a global supply glut.

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