Asia stocks are primed for a cautious open after US shares fell, weighed down by Federal Reserve meeting minutes that underscored the central bank’s hawkish outlook and prompted investors to increase forecasts for interest rate hikes.
(Bloomberg) — Asia stocks are primed for a cautious open after US shares fell, weighed down by Federal Reserve meeting minutes that underscored the central bank’s hawkish outlook and prompted investors to increase forecasts for interest rate hikes.
Shares fell in Australia and equity futures for Hong Kong’s Hang Seng Index dropped after the benchmark closed on the edge of a 10% correction Wednesday. The S&P 500 closed down 0.2% for its fourth consecutive decline while the Nasdaq 100 managed to edge into positive territory in the final minutes of Wall Street’s Wednesday session.
Australian and New Zealand 10-year yields rose. A Wednesday rally in Treasuries moderated after the Fed minutes were released. The minutes showed officials expect further interest rate increases to tame inflation. They also showed “a few” Fed officials were open to a 50 basis-point hike in the central bank’s meeting earlier this month when it raised interest rates 25 basis points.
The 10-year Treasury benchmark fell four basis points Wednesday, taking the edge off the 14 basis-point increase in the prior session. Short-dated Treasury yields fell by a smaller margin. Treasuries and Japanese equities will not trade in the Asian time zone due to a holiday in Japan.
Investors increased expectations for the peak to the Fed’s interest rate cycle. Market pricing now implies expectations for a peak of nearly 5.4% in July. A month ago, investors had priced in a peak of 4.9% in June. An index of the dollar was flat after strengthening Wednesday.
“Bottom line is that many market headwinds aren’t going away and investors should expect volatility to stay as they parse over the impact rates being higher for longer will have,” said Mike Loewengart at Morgan Stanley Global Investment Office.
Jobless claims data due Thursday in the US will help shine a light on the strength of the labor market, which has remained stubbornly robust through the rate-hiking cycle. Eurozone inflation data due today will also help investors outline the health of the European economy.
The Bank of Korea is expected to keep interest rates unchanged in a policy decision later today.
Elsewhere, the price of oil fell for a sixth-straight session as traders began to weigh the effects of restrictive monetary policy on the global economy.
In corporate news, shares in Nvidia Corp. rallied in after-hours trading following results after the bell that included a bullish revenue outlook. Intel Corp. slashed its dividend payment to the lowest level in 16 years. EBay Inc. projected revenue in the current quarter that topped analysts’ estimates in a sign the e-commerce company’s efforts to revive sales are beginning to work.
Key events this week:
- Eurozone CPI, Thursday
- US GDP, initial jobless claims, Thursday
- Atlanta Fed President Raphael Bostic speaks, Thursday
- BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
- US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
- Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets as of 8:32 a.m. Tokyo time:
Stocks
- S&P 500 futures rose 0.2%. The S&P 500 fell 0.2%
- Nasdaq 100 futures rose 0.5%. The Nasdaq 100 rose 0.1%
- Hang Seng futures fell 0.1%
- Australia’s S&P/ASX 200 fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0606
- The Japanese yen was little changed at 134.88 per dollar
- The offshore yuan was little changed at 6.9047 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $24,139.78
- Ether rose 1.3% to $1,640.79
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.92%
- Australia’s 10-year yield advanced two basis points to 3.89%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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