Asian markets fall ahead of Fed policy decision, tracking losses on Wall Street

The supply and demand fundamentals for oil are “fairly good”, but Pickering Energy Partners foresees more volatility ahead.

“Sentiment is nervous and overall we’re bullish, but you have to expect a little more volatility here over the next couple of months as we sort out the economy,” said the company’s CIO Dan Pickering.

Brent crude futures last traded 0.1[ads1]7% lower at $75.19 a barrel, while US West Texas Intermediate futures were 0.21% lower at $71.52 a barrel.

– Lee Ying Shan

Australia’s preliminary retail sales rose 0.4% month-on-month in March, ticking higher than February’s 0.2% increase, government data showed on Wednesday.

Discretionary retail appeared to be under more pressure with household goods falling 0.4%, as well as clothing, footwear and personal accessories falling 1%. Merchandise trade also saw a 0.2% decrease compared to a month ago.

Overall retail sales growth was mainly led by food retail, driven by high food inflation seen in the Australian economy.

– Jihye Lee

ING’s chief economist for Greater China Iris Pang lowered growth forecasts for Hong Kong, a day after the city reported gross domestic product grew 2.7% in the first quarter.

Speaking to CNBC’s “Squawk Box Asia,” Pang said she sees a U.S. recession “maybe around the fourth quarter” and expects the Fed to cut interest rates by 100 basis points by the end of 2023.

As a result, the outlook for Hong Kong and mainland China’s exports “will not be bright” in the second half of the year.

Pang cut the outlook for Hong Kong in the second half, bringing its full-year GDP growth forecast to 2.9%.

— Lim Hui Jie

Australia’s central bank governor Philip Lowe said “uncomfortably persistent” services inflation was one of the main reasons the Reserve Bank of Australia raised the cash rate by 25 basis points at Tuesday’s meeting to 3.85%.

In a speech on Tuesday night, Lowe explained that the inflation peak in Australia has passed, but added that it would take some time for inflation to return to the RBA’s target range of 2-3%.

He acknowledged that goods inflation is slowing, but services and energy inflation is likely to remain high, adding that he also sees “worryingly persistent” service inflation abroad.

“It is possible that circumstances may be different here in Australia, but experience overseas points to an upside risk, particularly given the high degree of commonality between countries in inflation dynamics recently,” Mr Lowe said.

— Lim Hui Jie

Bank of Korea CEO Rhee Chang-yong says it is too early to start talking about interest rate cuts.

South Korea’s central bank was one of the first in Asia to halt its tightening cycle, fueling market speculation that it could soon start cutting interest rates. But Rhee told CNBC’s Chery Kang at the Asian Development Bank’s annual meeting in Incheon that those expectations are “premature.”

“We made it clear, given that our core inflation is still well above our target, and we have good news, that our inflation is going below 4% in April, so it’s coming down,” Rhee said on Wednesday.

“But still, I think given that it’s over the target, we’ll have to wait and see, it would be a bit premature to talk about [a] pivot at this moment.”

– Jihye Lee

New Zealand’s unemployment rate held steady at 3.4% in the first quarter, unchanged from the last quarter of 2022. That’s slightly lower than economists’ expectations of 3.5%.

Unemployment rose 0.2 percentage points from 3.2 percent a year ago.

The country’s labor force participation rate was 72%, up 0.2 percentage points from the previous quarter and one percentage point higher than the 71% recorded in the first quarter of 2022.

— Lim Hui Jie

Jefferies expects shares of a global commercial real estate stock to rise more than 60% over the next 12 months.

The investment bank’s prediction comes at a time when the global commercial property market has seen prices fall sharply over the past year.

However, the property firm is expected to escape the downturn as it almost doubled the rent it charged its tenants and office vacancies in the region it targets fell last year.

CNBC Pro subscribers can read more here.

– Ganesh Rao

Prices of lithium, a key material used in electric vehicle batteries, have rebounded for the first time in months.

Analysts were generally bullish on the sector over the long term.

For investors looking to play the EV-related sector, CNBC surveyed lithium and battery stocks with buy ratings from over 70% of analysts covering them and an average upside of at least 15%.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Goldman Sachs says investors haven’t fully moved past the March banking crisis as banking stocks trade lower on Tuesday. The firm’s analysts noted that after the failures of Silicon Valley Bank and Signature Bank in March, the market’s worries were quickly eased by a deposit injection at First Republic Bank.

“Since bottoming out at 3,808 on March 13, the S&P 5000 is up nearly 10% [as of] Monday evening on the back of relaxed banking tensions, as well as a strong earnings season (so far) and a growing consensus that the Fed will soon halt its year-long rate hike cycle,” several Goldman analysts wrote in a Tuesday note.

“But today we appear to be seeing some return of the concerns from March following JPM’s announced acquisition of FRC Monday. Regional bank shares are down 4% to 13%. [Managing director Richard] Ramsden sees the JPM acquisition as incremental and points out that the transaction highlights that G-SIBs will be allowed to bid on FDIC transactions even if they are above the deposit limit,” the note continued.

– Hakyung Kim

Eric Rosengren thinks his former colleagues at the Federal Reserve will be making a mistake if they raise interest rates again on Wednesday.

The former Boston Fed president, who steps down from the board in September 2021, told CNBC on Tuesday that turmoil in the banking industry and an economic slowdown should push policymakers to end the rate hike campaign that began in March 2022.

“My own view is that the economy is likely to slow down in the second half of the year and that there is no need at this point to raise interest rates until we get a better look at what the second half of the year looks like,” Rosengren said on “Squawk Box.” “

Traders in the futures market are pricing in a 96% chance that the Federal Open Market Committee will approve a quarter-percentage-point rate hike when the two-day meeting ends, according to CME Group’s FedWatch tracker.

-Jeff Cox

WTI Crude settled 5.29% at $71.66, marking its lowest settlement since March 24, when it settled at $69.26. WTI Crude has fallen 10.7% in 2023.

Brent oil and natural gas also fell lower, falling 5.03% and 4.49% respectively. Brent crude has fallen 12.33% so far this year, closing at $75.32 on Tuesday. Meanwhile, natural gas has fallen more than 50% by 2023.

– Hakyung Kim

Oil prices fell sharply on Tuesday after an unexpected decline in Chinese factory activity reported on Sunday, ahead of further rate hikes expected from the Federal Reserve and the European Central Bank this week.

Brent crude futures fell 4.3% to $75.87 at 10:53 a.m. ET, while West Texas Intermediate crude futures fell 4.4% to $72.34 – their lowest level since late March.

The falls came despite news that OPEC oil production fell in April, according to a Reuters poll.

Job openings hit a nearly two-year low in March, a sign that the labor market is loosening, the Labor Department reported Tuesday.

The number of job openings totaled 9.59 million, the lowest since April 2021 and below the FactSet estimate of 9.64 million, according to the Job Openings and Labor Turnover survey.

The Federal Reserve is watching the JOLTS report closely for signs of labor slack. Falling vacancies is positive for inflation as it helps put less pressure on wage increases.

You can find the whole story here.

-Jeff Cox