Asian stocks were mixed as global investors await a US inflation report later Wednesday that will help shape the outlook for interest rates in the world’s biggest economy.
(Bloomberg) — Asian stocks were mixed as global investors await a US inflation report later Wednesday that will help shape the outlook for interest rates in the world’s biggest economy.
Shares climbed at the open in Australia, but fell in Japan and South Korea. Futures for Hong Kong rose 0.6% and an index of US-listed Chinese shares advanced 1.6% after Beijing extended support for a struggling property sector and data showed an acceleration in credit growth.
US stock futures were little changed in early trading in Asia. In the run-up to the consumer price index release, the S&P 500 extended its advance beyond the 4,400 mark while the Dow Jones Industrial Average added almost 1%. Energy producers led gains as West Texas Intermediate oil topped its key 100-day moving average. Activision Blizzard Inc. surged 10% as Microsoft Corp. won a US court’s OK to proceed with its $69 billion takeover deal.
Forecasters surveyed by Bloomberg expect the year-over-year rate of increase in core inflation moderating to 5% and headline inflation to 3.1%, according to the median estimate. But the slowdown will possibly not be enough to prevent additional policy tightening, with Federal Reserve officials widely expected to resume interest-rate increases later this month.
A gauge of the dollar slid Wednesday, while Treasury yields steadied. The yen advanced beyond the key 140 level amid speculation the Bank of Japan will tweak policy later this month.
The inflation report is unlikely to move the dial ahead of the Federal Reserve’s July meeting, but it will impact expectations of whether a second 25-basis-point rate hike is needed before the year’s end, according to Tony Sycamore, market analyst at IG Australia Pty.
“If headline inflation comes in at 2.9% to 3.2%, the Fed will likely hike by 25 basis points in July and then move to the sidelines, possibly until year-end,” Sycamore wrote in a note. “Yields would extend their decline from recent highs, the US dollar would ease, and the S&P 500 would likely rally ~0.75%.”
The New Zealand dollar will also be in focus during the Asian session, with the nation’s central bank expected to leave interest rates unchanged. That would end a streak of 12 consecutive hikes as the economy cools and inflation starts to wane. New Zealand’s sovereign bond yields declined.
Meanwhile in the US, after surging by a four-decade high in June 2022, CPI has pulled back steadily in the face of the Fed’s monetary policy onslaught. That slowdown has given support to the stock-market’s surge this year, and bulls have strong precedent for their enthusiasm.
Since the 1950s, inflation peaks have almost always been followed by double-digit equity gains, according to data compiled by the Leuthold Group. The S&P 500 has gained more than 20% since it bottomed out in October, placing it up about 15% since the peak CPI data was released last year.
Elsewhere, oil steadied Wednesday after rising amid indications that Russian crude production is dropping, signaling the market’s supply glut may be coming to an end. Adding to bullish sentiment is news that China will take more steps to revive its economy.
Key events this week:
- Canada rate decision, Wednesday
- Bank of England Governor Andrew Bailey speaks, Wednesday
- US CPI, Wednesday
- Federal Reserve issues Beige Book, Wednesday
- Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:03 a.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.5%
- Japan’s Topix index rose 0.3%
- Australia’s S&P/ASX 200 Index rose 0.3%
- Hong Kong’s Hang Seng futures rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1014
- The Japanese yen rose 0.2% to 140.06 per dollar
- The offshore yuan was little changed at 7.2107 per dollar
- The Australian dollar rose 0.1% to $0.6693
Cryptocurrencies
- Bitcoin rose 0.2% to $30,629.38
- Ether rose 0.2% to $1,878.37
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.96%
- Australia’s 10-year yield declined two basis points to 4.16%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
More stories like this are available on bloomberg.com
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