Asia Stocks Edge Higher in Face of Elevated Yields: Markets Wrap

Asian stocks edged higher in early trading Thursday amid caution as investors weighed the prospect of a higher peak in interest rates following more hawkish comments from Federal Reserve officials.

(Bloomberg) — Asian stocks edged higher in early trading Thursday amid caution as investors weighed the prospect of a higher peak in interest rates following more hawkish comments from Federal Reserve officials.

Equities made small gains in Japan and Australia while futures for Hong Kong declined. In the US Wednesday, the S&P 500 closed near the lowest in six weeks and Treasury yields climbed, with the 10-year rate piercing the closely watched 4% level.

Fed swaps are now pricing in a peak US policy rate of 5.5% in September, with some traders betting it may reach 6%. The impact of higher borrowing costs in the world’s largest economy is spilling over into markets around the world, which are already struggling to contain inflationary pressure.

Yields on Australian and New Zealand government bonds rose across the 2-year to 10-year maturities in moves that largely tracked tracked Treasuries.

The dollar was little changed in early Asian trading after a gauge of greenback strength dropped 0.5% on Wednesday, the most in a month.

The offshore yuan was one of the most notable gainers versus the dollar Wednesday, rallying more than 1% in its largest advance since November.

The mood in Asia markets has been a touch more upbeat than the US in recent days, with investors picking up on signs that China’s economy is recovering strongly after exiting its Covid-zero era. They are also looking to the upcoming National People’s Congress for any signs of policy support for markets.

Fed Speak

The trigger for higher yields was Fed officials on Wednesday reinforcing their hawkish stance. Atlanta Fed’s Raphael Bostic called for continued rate hikes to above 5% to make sure inflation doesn’t pick up again. Minneapolis Fed President Neel Kashkari, meanwhile, said he’s concerned that there isn’t much of an indication that the central bank’s rate hikes are slowing down the services sector.

While China’s economic data briefly buoyed US stock futures before the markets opened, that bounce didn’t sustain during Wednesday’s trading session.

US stock futures were marginally higher in Asia.

Key events this week:

Eurozone CPI, unemployment, Thursday
US initial jobless claims, Thursday
Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 9:11 a.m. Tokyo time. The S&P 500 fell 0.5% lower
Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.9%
Japan’s Topix rose 0.1%
Australia’s S&P/ASX 200 Index rose 0.3%
Hang Seng Index futures fell 0.8%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0666
The Japanese yen was little changed at 136.16 per dollar
The offshore yuan was little changed at 6.8786 per dollar
The Australian dollar was little changed at $0.6757

Cryptocurrencies

Bitcoin rose 0.4% to $23,664.25
Ether rose 0.6% to $1,667.59

Bonds

The yield on 10-year Treasuries was little changed at 3.99%
Australia’s 10-year yield advanced five basis points to 3.83%

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 Rheaa Rao.

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