Asian stocks rose on cautious optimism after Wall Street largely looked through a US inflation report that was in-line with estimates, reinforcing bets the Federal Reserve may pause rate hikes but signal it’s not over yet.
(Bloomberg) — Asian stocks rose on cautious optimism after Wall Street largely looked through a US inflation report that was in-line with estimates, reinforcing bets the Federal Reserve may pause rate hikes but signal it’s not over yet.
Equities in Japan and South Korea gained slightly while those in Australia edged higher ahead of a August jobs report. Australian bond yields fell with US Treasuries, while Japanese bond traders will be closely monitoring a sale of 20-year securities amid speculation the Bank of Japan may take steps to normalize policy.
Two-year Treasury yields remained below 5% in Asia trading and the greenback edged lower, as traders prepared themselves for upcoming US retail sales and producer price data. The core consumer price index, which excludes food and energy costs, advanced 0.3% from July, the first acceleration in six months. From a year ago, it increased 4.3% — in line with estimates and marking the smallest advance in nearly two years. It’s still above the Fed’s 2% goal.
Swaps tied to the next two Federal Open Market Committee meetings continued to price in little chance of a hike next week — and about 50% odds of one in November.
“Asia has some clear air to reclaim some of the week’s losses,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. “US inflation offered up more questions than answers, but it’s a volatility event out of the way, so that’s supportive of risk assets at the margins – the proverbial can has been kicked down the road just a little.”
The S&P 500 was little changed on Wednesday while the Dow Jones Industrial Average underperformed. American Airlines Group Inc. led US stock losses after cutting its earnings outlook amid a jump in jet fuel prices. Most megacaps rose, with the chiefs of five of the 10 biggest US companies appearing at a closed-door Senate meeting to shape how artificial intelligence is regulated. Apple Inc. fell as China flagged security problems with iPhones.
Arm Holdings Plc priced its initial public offering at the top end of its range to raise $4.87 billion in the largest listing of the year, while United Auto Workers President Shawn Fain said talks with major Detroit automakers for a new labor contract are still far apart.
In Asia, distressed Chinese developer Country Garden Holdings Co. is approaching another deadline for voting by bondholders on its request to extend repayment, after winning such support on 10.3 billion yuan ($1.4 billion) of other local notes.
Markets will now look toward the European Central Bank policy meeting and upgraded inflation forecasts Thursday as evidence builds Europe is facing persistent cost pressures that’s been made worse by soaring energy prices. Money markets are pricing in an two-thirds chance the ECB raises interest rates by a quarter of a percentage point, a rapid shift from earlier this month where traders were firmly in the camp rates would be held steady.
“It will be a close decision,” said Imre Speizer, a strategist at Westpac Banking Corp. in Auckland. “Inflation persistence is likely to feature in the ECB’s upgraded projections” with core prices more stubborn, he wrote in a note to clients.
In commodities, oil reversed Wednesday’s losses to trade near the highest since November, while gold traded edged higher after losses in the last two sessions.
Key events this week:
- Japan industrial production, Thursday
- European Central Bank policy meeting and news conference by President Christine Lagarde, Thursday
- US retail sales, PPI, business inventories, initial jobless claims, Thursday
- China property prices, retail sales, industrial production, Friday
- US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures edged 0.1% higher as of 9:38 a.m. Tokyo time. The S&P 500 was little changed
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.4%
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 was little changed
- Euro Stoxx 50 futures fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0733
- The Japanese yen rose 0.2% to 147.19 per dollar
- The offshore yuan was little changed at 7.2696 per dollar
- The Australian dollar rose 0.2% to $0.6438
Cryptocurrencies
- Bitcoin was little changed at $26,246.23
- Ether rose 0.7% to $1,614.75
Bonds
- The yield on 10-year Treasuries was little changed at 4.24%
- Australia’s 10-year yield declined three basis points to 4.12%
Commodities
- West Texas Intermediate crude rose 0.4% to $88.86 a barrel
- Spot gold rose 0.1% to $1,910.64 an ounce
This story was produced with the assistance of Bloomberg Automation.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.