Asian markets ahead of Fed policy decision, following Wall Street losses

Oil supply and demand fundamentals are “pretty good,” but Pickering Energy Partners predicts greater volatility ahead.

“Sentiment is nervous, and generally we’re bullish, but you should expect more volatility here over the next two months as we adjust the economy,” said the company’s CIO, Dan Pickering.

Brent crude futures were last trading down 0.17% at $75.19 a barrel, while US West Texas Intermediate futures were down 0.21% at 71.52 $ per barrel.

—Lee Ying Shan

Australia’s preliminary retail sales rose 0.4% month-on-month in March, topping February’s 0.2% rise, government data showed on Wednesday.

Discretionary retail appears to be under more pressure with housewares down 0.4%, as well as clothing, footwear and personal accessories down 1%. Department store retail also contracted 0.2% from a month ago.

Overall retail sales growth was mainly driven by food retailing, driven by the high food inflation seen in the Australian economy.

– Jihye Lee

ING’s chief economist for Greater China, Iris Pang, lowered her growth forecast for Hong Kong, a day after the city said gross domestic product rose 2.7% in the first quarter.

Speaking to CNBC’s “Squawk Box Asia,” Pang said she foresees a U.S. recession “maybe around the fourth quarter” and expects the Fed to cut rates by 100 basis points. basis by the end of 2023.

As a result, the export outlook for Hong Kong and mainland China “will not be bright” in the second half.

Pang lowered its outlook for Hong Kong in the second half of the year, raising its full-year GDP growth forecast to 2.9%.

—Lim Hui Jie

Australia’s central bank governor, Philip Lowe, said “uncomfortably persistent” services inflation was a key reason the Reserve Bank of Australia raised its benchmark rate by 25 basis points during its meeting. Tuesday’s meeting at 3.85%.

In a speech on Tuesday evening, Lowe explained that Australia’s peak inflation had passed, but added that it will take some time before inflation returns to the RBA’s 2-3% target range. .

He acknowledged that goods inflation is slowing, but services and energy inflation are expected to remain high, adding that he also sees “worrying and persistent” services inflation overseas.

“Circumstances may be different here in Australia, but overseas experience indicates an upside risk, particularly given the high degree of commonalities across countries in inflation dynamics recently” , said Lowe.

—Lim Hui Jie

Bank of Korea Governor Rhee Chang-yong said it was too early to start talking about lowering rates.

South Korea’s central bank was one of the first in Asia to pause its tightening cycle, sparking market speculation that it could soon start cutting rates. But Rhee told CNBC’s Chery Kang at the Asian Development Bank’s annual meeting in Incheon that those expectations were “premature.”

“We’ve made it clear, given that our core inflation is still well above our target, and we have good news, that our inflation is going below 4% in April, so it’s coming down,” Rhee said on Wednesday. .

“But still, I think given it’s over the target, we have to wait and see, it would be a little premature to talk about (a) pivot at the moment.”

– Jihye Lee

New Zealand’s unemployment rate was flat at 3.4% for the first quarter, unchanged from the last quarter of 2022. That’s slightly below economists’ expectations of 3.5%.

The unemployment rate rose 0.2 percentage points from 3.2% a year ago.

The country’s labor force participation rate stood at 72%, up 0.2 percentage point from the previous quarter and one percentage point higher than the 71% recorded in the first quarter of 2022.

—Lim Hui Jie

Jefferies expects global commercial real estate stock to rise more than 60% over the next 12 months.

The investment bank’s forecast comes at a time when the global commercial real estate market has seen prices fall sharply over the past year.

However, the real estate company is expected to escape the recession as it nearly doubled the rent it charged its tenants, and office vacancy in the region it targets fell last year.

CNBC Pro subscribers can learn more here.

—Ganesh Rao

Prices for lithium, a key material used in electric vehicle batteries, rebounded for the first time in months.

Analysts were generally bullish on the long-term sector.

For investors looking to play in the EV-related sector, CNBC picked lithium and battery stocks with buy ratings of over 70% from analysts covering them and an average price target of at least minus 15%.

CNBC Pro subscribers can learn more here.

—Weizhen Tan

Goldman Sachs says investors are not completely out of the March banking crisis as bank stocks trade lower on Tuesday. Firm analysts noted that following the failures of Silicon Valley Bank and Signature Bank in March, market concerns were quickly allayed by an injection of deposits at First Republic Bank.

“Since hitting a low of 3808 on March 13, the S&P 5000 has gained nearly 10% (as of) Monday night on the back of relaxed banking strains, as well as a strong earnings season (until now) and a growing consensus that the Fed will soon pause its one-year rate hike cycle,” several Goldman analysts wrote in a Tuesday note.

“But today we appear to be seeing a return of March concerns following the announced acquisition of FRC by JPM on Monday. Regional bank shares are down 4% to 13%. (Chief Executive Richard) Ramsden considers the acquisition of JPM as accretive and highlights that the transaction underscores that G-SIBs will be permitted to bid on FDIC transactions even if they exceed the deposit cap,” the note continued.

—Hakyung Kim

Eric Rosengren thinks his former Federal Reserve colleagues are making a mistake if they raise interest rates again on Wednesday.

The former Boston Fed chairman, who retired from the board in September 2021, told CNBC on Tuesday that turmoil in the banking sector and an economic slowdown should push policymakers to end the rate hike campaign that began in March 2022.

“My personal view is that the economy will most likely slow in the second half and there is no need at this point to raise rates until we have a better idea of ​​what the second half will look like. semester,” Rosengren said on “Squawk Box.”

Futures traders are pricing a 96% chance the Federal Open Market Committee will approve a quarter-percentage-point rate hike by the end of the two-day meeting, according to CME Group’s tracker FedWatch.

—Jeff Cox

WTI Crude was up 5.29% at $71.66, marking its lowest level since March 24, when it stood at $69.26. WTI crude is down 10.7% in 2023.

Brent crude oil and natural gas also declined, falling 5.03% and 4.49% respectively. Brent crude is down 12.33% year-to-date, closing at $75.32 on Tuesday. Meanwhile, natural gas has fallen more than 50% in 2023.

—Hakyung Kim

Oil prices fell sharply on Tuesday following an unexpected contraction in Chinese factory activity, reported on Sunday, and ahead of further interest rate hikes expected from the Federal Reserve and European Central Bank this week .

Brent crude futures fell 4.3% to $75.87 as of 10:53 a.m. ET, while West Texas Intermediate crude futures fell 4.4% to $72.34 – their lowest levels since the end of March.

The declines came despite news that OPEC oil production fell in April, according to a Reuters survey.

Job postings hit a nearly two-year low in March, a sign the labor market is easing, the Labor Department reported Tuesday.

Openings totaled 9.59 million, the lowest since April 2021 and below FactSet’s estimate of 9.64 million, according to the Job Openings and Labor Turnover Survey. .

The Federal Reserve is watching the JOLTS report closely for signs of a slowdown in the labor force. The fall in job vacancies is a positive factor for inflation as it helps to reduce the pressure on wage increases.

The full story can be found here.

—Jeff Cox