??Powell's Hawkish Stance and Weak Asian Markets Impact Global Stocks!

On Friday, Asian stocks experienced a decline to their lowest levels in a week, while the dollar maintained strength due to elevated Treasury yields, following hawkish remarks from U.S. Federal Reserve Chair Jerome Powell that dispelled expectations of an imminent peak in interest rates. MSCI's broadest index of Asia-Pacific shares outside Japan dropped by 1% to a one-week low of 486.39, while Japan's Nikkei (NI225) recorded a 0.50% decline.

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U.S. Federal Reserve officials, including Powell, expressed uncertainty on Thursday about whether interest rates are sufficiently high to combat inflation effectively. Powell, speaking at an International Monetary Fund event, stated that the Fed is "committed to ... monetary policy that is sufficiently restrictive to bring inflation down to 2% over time," adding, "We are not confident that we have achieved such a stance."

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Powell's remarks, combined with a weak auction of $24 billion in 30-year Treasuries , led to higher yields, dampening sentiment in equity markets and lending support to the dollar. "There is no point in corralling the market into expecting cuts until shortly before they look necessary," commented Rob Carnell, Asia-Pacific head of research at ING. Investors had been seeking indications of U.S. interest rates reaching a peak following the Fed's decision to hold rates steady last week. This move had fueled speculation that the rate-hiking cycle was concluding, sparking a brief rally in risky assets.

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Carnell emphasized that the Fed needs to maintain relatively high rates and bond yields to achieve tighter financial conditions, thereby lowering inflation and paving the way for potential rate cuts. He suggested that the Fed should continue the rhetoric of uncertainty, stating, "'We're not definitely finished, there's still a chance of more' ... (you) do that right up until the day before you cut."

Overnight, the three major U.S. stock indices closed lower, breaking the longest winning streaks for the Nasdaq (IXIC) and S&P 500 (SPX) in two years, as optimism over looser monetary policy waned. China stocks eased by 0.6%, and Hong Kong's Hang Seng Index (HSI) was 1.6% lower amid resurfacing concerns about the world's second-largest economy. Data on Thursday revealed that consumer prices in China dipped back into contraction. Tapas Strickland, head of market economics at NAB, noted that the data keeps pressure on Beijing to persist with incremental easing in monetary and fiscal policy.

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In the Asian hours, the yield on 10-year Treasury notes (US10Y) eased by 1 basis point to 4.620%, following a rise of 10.7 bps overnight. The yield on the 30-year Treasury bond (US30YT=RR) fell by 2.1 basis points to 4.746% after climbing 12.1 bps overnight. In the currency market, the dollar index (DXY) retained its overnight gains, reaching 105.87. The dollar stood near a one-year high at 151.38 yen (USDJPY) and touched one-week highs against the Australian and New Zealand dollars.

U.S. crude (CL1!) eased by 0.03% to $75.72 per barrel, and Brent (BRN1!) was at $80.08, up 0.09% on the day. The oil market faced challenges this week due to demand concerns, triggered by a fading war-risk premium that prompted a sell-off. Spot gold (GOLD) saw little change at $1,959.74 per ounce, on track for its worst week in more than a month, as elevated yields and a stronger dollar exerted pressure.

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