Asian stocks slipped as traders pared risk ahead of a Federal Reserve meeting this week that will most likely see the US central bank deliver another interest-rate hike.
(Bloomberg) — Asian stocks slipped as traders pared risk ahead of a Federal Reserve meeting this week that will most likely see the US central bank deliver another interest-rate hike.
MSCI Inc.’s Asia Pacific Index fell after an earlier advance, with Japan and Hong Kong leading the losses. Shares in Hong Kong swung between gains and losses as traders weighed a surprise contraction in China manufacturing against upbeat holiday spending data. Chinese markets will reopen Thursday after a five-day holiday.
A gauge of the dollar strength ticked lower and Treasuries edged up in Asia trading after selling across the curve Monday, with yields on 30-year bonds climbing the most in 2023. Swap traders have slightly upgraded the odds the Fed will raise its policy rate by a quarter point Wednesday, but now only expect rate cuts to happen in the later part of this year.
Investors will be closely listening to the Fed’s tone for any hawkish surprise, according to Julia Wang, a global market strategist at JPMorgan Chase & Co.’s private banking unit in Hong Kong. “So much rate cuts have been priced in so soon and maybe that doesn’t happen in the near term,” Wang said on Bloomberg Television. “Maybe we’ll have a little bit of a correction and that means that dollar could strengthen.”
Australian bonds fell and the currency steadied while traders awaited a policy decision where the nation’s central bank is likely to extend a pause in rate increases following a deceleration in inflation.
China’s official manufacturing purchasing managers’ index fell to 49.2 in April, according to data released Sunday, feeding concerns that the economy may struggle to sustain growth momentum. Still, initial data from the Golden Week holiday showed strong travel, shopping and casino spending.
Payment misses by Chinese developers added to the cloudy outlook, with a gauge of real estate companies dropping 1.8%.
Meanwhile, US Treasury Secretary Janet Yellen told lawmakers on Monday that the nation risked default as soon as June 1. That came amid a high-stakes game of chicken in Washington over the debt limit.
“We see only a temporary rise in selected Treasury bill yields as the date nears when the US Treasury might run into trouble making payments or need to prioritize debt payments over other obligations,” a team of strategists at BlackRock Investment Institute, including Jean Boivin, wrote in a note. “Still, we could see market volatility and risk assets come under pressure as in past episodes.”
In the US investment-grade bond market, issuance jumped to more than $22 billion in one of the busiest sessions of 2023. Several borrowers are piling in after exiting their earnings blackouts. Among notable firms tapping the market: Meta Platforms Inc. raised $8.5 billion, Comcast Corp. priced a $5 billion deal and Hershey Co. sold $750 million in bonds.
Elsewhere, oil gained while gold was little changed.
Key events this week:
- RBA rate decision, Tuesday
- US JOLTS job openings, factory and durable goods orders, Tuesday
- ADP employment, S&P global US services PMI, ISM services, Wednesday
- Fed Chair Jerome Powell holds news conference following rate decision, Wednesday
- US initial jobless claims, trade balance, Thursday
- European Central Bank rate decision, followed by ECB President Christine Lagarde’s news conference, Thursday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 12 p.m. Tokyo time. The S&P 500 was little changed
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.1%
- Japan’s Topix index rose 0.4%
- Hong Kong’s Hang Seng Index fell 0.5%
- Australia’s S&P/ASX 200 index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.0988
- The Japanese yen was little changed at 137.40 per dollar
- The offshore yuan was little changed at 6.9563 per dollar
- The Australian dollar was little changed at $0.6634
Cryptocurrencies
- Bitcoin rose 1.2% to $28,021.16
- Ether rose 1.2% to $1,829.3
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.55%
- Japan’s 10-year yield advanced 1.5 basis point to 0.415%
- Australia’s 10-year yield advanced two basis points to 3.37%
Commodities
- West Texas Intermediate crude rose 0.1% to $75.77 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott.
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