Asian stocks fluctuated as traders assessed how close the Federal Reserve is to peak interest rates after US inflation data.
(Bloomberg) — Asian stocks fluctuated as traders assessed how close the Federal Reserve is to peak interest rates after US inflation data.
Alibaba Group Holding Ltd. dragged Hong Kong shares lower on a report its early backer is moving to cut its holdings. Euro Stoxx 50 futures rose 0.1%, while contracts for US stocks were flat after both the S&P 500 and tech-heavy Nasdaq 100 closed Wednesday near session lows.
The US dollar weakened against most of its major peers, while Treasury yields stayed in a narrow range, with the two-year holding below 4%. The Aussie rallied after job data beat forecasts.
The latest US inflation data may not be enough to prevent the Fed from raising interest rates one more time next month. However, investors could take comfort that the US central bank wasn’t anticipating a deep recession, as shown in their meeting minutes, according to Charles-Henry Monchau, chief investment officer at Syz Group.
“Yes, they talked about recession, but they talked about the mild recessions. So no hard recession so far coming from these SVB fallouts,” Geneva-based Monchau said on Bloomberg Television, referring to the turmoil triggered by Silicon Valley Bank’s collapse.
US inflation data offered evidence for both bond bulls and bears. While the year-on-year headline figure fell, core prices edged higher. Swaps markets showed the odds are still in favor of a quarter-point Fed hike in May, while traders maintained their expectations the central bank will cut rates later this year.
“Premature cuts will actually be a challenge,” Neeraj Seth, head of Asian credit at BlackRock Inc. in Singapore, said on Bloomberg Television. “I don’t expect to see an aggressive cutting cycle from here, but certainly we are at a level of rates where the Fed can actually pause after the next hike.”
Minutes of the Fed’s March meeting published Wednesday showed policymakers scaled back expectations for rate hikes this year after a series of bank collapses roiled markets. Fed speakers sent mixed messages, with San Francisco Fed President Mary Daly saying more rate hikes may not be needed, while Richmond Fed’s Thomas Barkin said “we still have a ways to go.”
On the economic front in Asia, Australian employers added 53,000 jobs in March from the prior month, more than double economists’ forecasts, helping drive the Australian dollar higher. China said exports jumped almost 15% in March from a year ago in dollar terms, compared with estimates for a decline.
The yen swung to a loss after strengthening earlier on haven demand when news broke that North Korea launched a suspected ballistic missile toward waters off Japan’s east coast.
Elsewhere, oil slipped, but still traded near the highest close since November on signs of a tighter global market. Gold pared gains.
Key events this week:
- US PPI, initial jobless claim, Thursday
- US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
- Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Stocks
- S&P 500 futures were little changed as of 6:45 a.m. London time. The S&P 500 fell 0.4%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.9%
- Euro Stoxx 50 futures rose 0.2%
- Japan’s Topix index was little changed
- Hong Kong’s Hang Seng Index fell 0.8%
- China’s Shanghai Composite Index fell 0.4%
- Australia’s S&P/ASX 200 Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0986
- The Japanese yen fell 0.1% to 133.30 per dollar
- The offshore yuan was little changed at 6.8796 per dollar
- The Australian dollar rose 0.2% to $0.6702
- The British pound was little changed at $1.2486
Cryptocurrencies
- Bitcoin rose 0.5% to $30,113.84
- Ether rose 0.5% to $1,918.39
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.41%
- Japan’s 10-year yield declined 0.5 basis point to 0.455%
- Australia’s 10-year yield advanced four basis points to 3.28%
Commodities
- West Texas Intermediate crude fell 0.4% to $82.96 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Stephen Kirkland, Mark Cranfield and Jeanny Yu.
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