Berliner Boersenzeitung - Markets struggle as traders digest Fed's hawkish pivot

Data showing Japanese inflation rose more than expected last month did little to help the yen, which took a hefty hit from the US central bank's more hawkish tilt and the Bank of Japan's refusal to tighten monetary policy.

Traders are now awaiting the release later in the day of data on US personal consumption expenditure -- the Fed's preferred gauge of inflation and the last major piece of data for the year.

Wall Street provided a meek lead, having squandered an early bounce from Wednesday's plunge that was sparked by the Fed's changed rate forecast, with sentiment weighed by a jump in Treasury yields to their highest level since May.

Asia also failed to recover from the previous day's losses.

Hong Kong, Tokyo, Shanghai, Sydney, Singapore, Seoul, Taipei, Mumbai and Bangkok all fell, though Wellington, Jakarta and Manila edged up.

London, Paris and Frankfurt all opened lower.

US monetary policymakers on Wednesday cut rates as expected, but their closely watched "dot pot" guidance on future moves showed they saw two reductions next year, compared with four previously targeted.

Data showing a forecast-topping rise in US economic growth and consumer spending did little to ease concerns that the Fed will keep borrowing costs higher for longer.

Meanwhile, swaps markets are pricing in less than two for all of 2025.

Fed boss Jerome Powell acknowledged Wednesday that Trump's economic plans, including tariff hikes, tax cuts and mass deportations, have been a consideration as policymakers weigh their rate cut estimates.

Economists at Bank of America Global Research said in a commentary: "We stick with our forecast for two more rate cuts next year, but the risks have clearly shifted in the direction of fewer (no) cuts. The onus is now on the data to justify additional cuts.

"The dramatic reaction in markets clearly indicates that an extended pause is now on the table."

They added that if the jobs market ran into severe trouble in the next few months "the Fed would turn more dovish, and (Wednesday's) meeting will feel like a bump in the road, rather than a paradigm shift, a few months down the line".

Investors are keeping a watch on developments in Washington after the House of Representatives rejected a Republican-led funding bill to avert a government shutdown, with federal agencies due to run out of cash on Friday night and cease operations starting this weekend.

The legislation would have kept the government open through March and suspended the borrowing limit for president-elect Donald Trump's first two years in office.

But it was sunk by Republican debt hawks, dealing a blow to their leader and his incoming "efficiency czar" Elon Musk, who had put the package forward after sabotaging a bipartisan one amid complaints about items in the text allegedly ballooning its overall cost.

The dollar held on to its latest gains against its major peers, briefly hitting a five-month high near 158 yen before easing slightly after the government warned Friday against speculators and hinted it could step in to support the currency.

Finance Minister Katsunobu Kato said: "The government's deeply concerned about recent currency moves, including those driven by speculators.

"We will take appropriate action if there are excessive moves in the currency market."

The greenback was also near two-year highs against the euro, while bitcoin tanked to around $97,000 -- having earlier in the week hit a new record of more than $108,000.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: DOWN 0.3 percent at 38,701.90 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 19,720.70 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,368.07 (close)

London - FTSE 100: DOWN 0.3 percent at 8,083.12

Euro/dollar: UP at $1.0381 from $1.0364 on Thursday

Pound/dollar: UP at $1.2500 from $1.2496

Dollar/yen: DOWN at 156.90 yen from 157.35 yen

Euro/pound: UP at 83.04 pence from 82.91 pence

West Texas Intermediate: DOWN 0.5 percent at $69.01 per barrel

Brent North Sea Crude: DOWN 0.5 percent at $72.49 per barrel

New York - Dow: UP less than 0.1 percent at 42,342.24 (close)

(F.Schuster--BBZ)