The Japan Times - Markets drop, gold hits record on Fed concern over Trump policies

The losses come despite a second-straight record close on Wall Street and follow a recent rally as traders have rolled with the president's latest tariff salvos, betting that they are being used as negotiating tactics.

Minutes from the US central bank's January meeting suggested officials were not likely to cut interest rates any time soon -- having reduced them at three successive meetings -- citing worries about the impact of Trump's policies.

Decision makers expected that "under appropriate monetary policy, inflation would continue to move toward (their target of) two percent, although progress could remain uneven", the minutes said.

But without referring to Trump by name, the minutes said policymakers raised concerns that "the effects of potential changes in trade and immigration policy" could complicate the disinflation process.

The remarks come after a number of economists warned that the Republican's pledge to ramp up tariffs on trade partners while slashing taxes, regulations and immigration could fan inflation.

Traders see a roughly 80 percent likelihood the Fed will make no more than two quarter-point cuts this year, according to CME Group.

The minutes also revealed that officials were mindful that the debt ceiling needed to be lifted to prevent the country from defaulting on its obligations, which could deal a hefty blow to the global economy.

The government hit its limit in January but the Treasury has managed to keep things ticking over by using so-called extraordinary measures.

"The overall tone of the meeting minutes was unsurprising, considering that Fed chair Jerome Powell had said on no less than five separate occasions during the January press conference that the committee did not need to be 'in a hurry' to make further adjustments to policy rates," said Ryan Wang, US economist at HSBC.

- Strong yen -

While all three main indexes in New York rose, with the S&P 500 at another all-time peak, Asia stumbled.

Hong Kong, which has climbed around 15 percent so far this year, dropped more than one percent as the China tech surge came to an end.

Tokyo was weighed down by a stronger yen, which briefly broke below 150 per dollar as the Bank of Japan eyes more interest rate hikes, while Sydney, Seoul, Wellington, Taipei, Mumbai, Bangkok, Singapore and Manila also retreated.

Shanghai was given a fillip and pared early losses to end flat after Trump suggested on Wednesday that a trade deal with China was "possible".

He also told journalists aboard Air Force One on Wednesday that he was considering lumber tariffs of "maybe 25 percent" in the coming months.

London opened lower, although Paris and Frankfurt rose.

And gold hit a record above $2,954 as investors rushed into the safe-haven commodity, which is sought out in times of uncertainty and as central banks stock up.

Dealers are keeping a nervous eye on developments in Europe after Brussels and Kyiv were excluded from the first high-level talks between the United States and Russia since the start of the war in Ukraine.

Trump also raised eyebrows by calling Ukrainian leader Volodymyr Zelensky a "dictator" on Wednesday, widening a personal rift with major implications for efforts to end the conflict triggered by Russia's invasion three years ago.

The United States has provided essential funding and arms to Ukraine but Trump made an abrupt policy shift by opening talks with Moscow just weeks after he returned to the White House.

"A Dictator without Elections, Zelenskyy better move fast or he is not going to have a Country left," Trump wrote on his Truth Social platform.

Zelensky was elected in 2019 for a five-year term and has remained leader under martial law imposed as his country fights for its survival.

- Key figures around 0815 GMT -

Tokyo - Nikkei 225: DOWN 1.2 percent at 38,678.04 (close)

Hong Kong - Hang Seng Index: DOWN 1.6 percent at 22,576.98 (close)

Shanghai - Composite: FLAT at 3,350.78 (close)

London - FTSE 100: DOWN 0.3 percent at 8,690.64

Euro/dollar: UP at $1.0440 from $1.0428 on Wednesday

Pound/dollar: UP at $1.2600 from $1.2582

Dollar/yen: DOWN at 150.10 from 151.40 yen

Euro/pound: DOWN at 82.80 pence from 82.81 pence

West Texas Intermediate: DOWN 0.4 percent at $71.95 per barrel

Brent North Sea Crude: UP 0.3 percent at $76.25 per barrel

New York - Dow: UP 0.2 percent at 44,627.59 (close)

Y.Kato--JT