Asian stocks trim losses with US Fed’s rate in focus

The dollar was little changed in Asia after weakening against its major peers on Wednesday following the inflation report. The yen edged higher after North Korea launched a missile toward waters off Japan’s east coast, prompting a warning for residents to take shelter.

Swaps markets showed the odds are still in favor of a quarter-point Fed hike in May, while traders maintained their expectations the US central bank will cut rates later this year. Treasury yields stayed in a narrow range, with the two-year slightly below 4%. Australia’s bond yields ticked higher.

US stocks rallied at the start of Wednesday’s trading after data showed headline US consumer prices rose less than economists forecast, while the closely watched core CPI number increased 0.4 percent, meeting estimates and down from the prior month’s 0.5 percent gain. But the equity rally wavered, with risk sentiment deteriorating as traders assessed the outlook for inflation, higher rates and economic growth.

The moderation in inflation isn’t fast enough for the markets to see the Fed reacting by cutting rates starting in the summer, said Anna Rathbun, chief investment officer at CBIZ Investment Advisory Services. “We do believe that the Fed is going to stick to its hawkish higher-for-longer mantra,” she said on Bloomberg Television.

On the economic front in Asia, Australian jobs and Chinese trade data are due Thursday. Aussie job growth likely slowed last month, while the unemployment rate probably rose, according to Bloomberg surveys. For China, trade figures for March may show weaker external demand taking a heavier toll on exports, Bloomberg Intelligence said in a note.

Minutes of the Fed’s March meeting showed policymakers scaled back expectations for rate hikes this year after a series of bank collapses roiled markets, and stressed they would remain vigilant for the potential of a credit crunch to further slow the economy.

Fed speakers sent mixed messages on the inflation battle on Wednesday. San Francisco Fed President Mary Daly said more rate hikes may not be needed, while Richmond Fed’s Thomas Barkin said “we still have a ways to go.”

Elsewhere, oil held near the highest close in five months on signs of a tighter global market and gold rose. Bitcoin slumped, dipping back below $30,000 after climbing to the highest since June on Tuesday.