Profit taking in Wall Street hits Asian markets

October 22, 2024 (MLN): Most Asian markets turned lower Tuesday after a negative lead from Wall Street, fueled by profit-taking, while traders tried to ascertain the outlook for U.S. interest rates.

Comments from top Federal Reserve officials suggested a desire for a slower pace of rate cuts, tempering hopes for another significant reduction at the bank's next meeting. Additionally, worries in the Middle East pushed gold to a new record.

With few catalysts to drive business, investors stepped back Tuesday after the Dow and S&P 500 came off all-time highs. Concerns are growing that stocks may be overbought and due for a correction.

Focus is now on the latest earnings season, with tech titans Alphabet and IBM scheduled to announce results over the next two days. Boeing, Coca-Cola, General Motors, and L'Oréal are also in the pipeline.

Bets on another 50-basis-point rate cut by the Fed have been scaled back following a recent run of strong U.S. data, including job creation. Several decision-makers have aimed to temper expectations. Kansas City Fed boss Jeffrey Schmid supported a slower pace of easing, stating it would allow the Fed to find a neutral level.

"While I support dialling back the restrictiveness of policy, my preference would be to avoid outsized moves, especially given uncertainty over the eventual destination of policy and my desire to avoid contributing to financial market volatility," he said in prepared remarks on Monday.

He was joined by his Dallas counterpart Lorie Logan and Minneapolis Fed boss Neel Kashkari, who also advocated for a cautious approach.

Still, San Francisco president Mary Daly indicated the bank would continue to cut rates, saying, "So far, I haven't seen any information that would suggest we wouldn't continue to reduce the interest rate."

After the tepid lead from Wall Street, Asia struggled. Tokyo dropped more than one percent, even as the yen softened against the dollar, reaching its weakest level since early August. Sydney, Seoul, Singapore, Wellington, Taipei, and Jakarta also saw declines.

However, Hong Kong and Shanghai rose, with dealers hoping for more stimulus from China's government after a slew of announcements over the past month.

Gold continued to rise to new highs, hitting a record $2,740.59 at one point on Monday as traders sought a safe haven amid concerns about the Middle East crisis, particularly as Israel considers its response to Iran's missile barrage this month. Uncertainty over the U.S. presidential election next month has also fueled bullion's rally.

Concerns about a possible wider conflict in the Middle East lifted oil prices at the start of the week, though they dipped slightly in Asian trade on Tuesday.

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