Asian markets struggle to find direction amid Fed uncertainty

September 27, 2023 (MLN): Asian Markets flittered between gains and losses Wednesday as the hefty selling witnessed in the first few days of the week eased but traders remain consumed by worries over the economy as the Federal Reserve considers hiking interest rates further, as APP reported.

With inflation still sitting well above the central bank's target and the labour market showing few signs of softening, decision-makers have warned that more tightening will be needed to achieve their goal.

However, while the economy remains in reasonable health, there is a growing concern that officials could tip it into recession next year if it keeps squeezing, with rates already at a 22-year high.

The bank last week indicated another lift could be on the cards before year's end, while boss Jerome Powell and other policy board members have said they could keep borrowing costs elevated for an extended period, with fewer cuts than hoped in 2024.

Analysts said investors were trying to come to terms with that prospect, and a spike in Treasury yields -- a gauge of future rates -- was causing a lot of unease in trading rooms, particularly with earnings season looming.

In a sign of the worry among investors, the VIX "fear gauge" of volatility is sitting at its highest level since late May following data showing a bigger-than-expected drop in US consumer confidence owing to higher gasoline and food prices.

"The expected further increase in volatility over the next few weeks is valid," said Stephen Innes of SPI Asset Management.

"Earnings season jitters are likely compounding the current 'higher-for-longer' sell-off and encouraging folks to pull even more chips off the table.

"During this period, companies often announce whether they will surpass or fail to reach their full-year goals; hence, corporate earnings could be viewed as a place-setter and may dictate if there is any Santa rally this year."

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