Asian stocks are poised to decline after US shares fell in a choppy session amid concern moderating inflation won’t keep the Federal Reserve from raising interest rates again.
(Bloomberg) — Asian stocks are poised to decline after US shares fell in a choppy session amid concern moderating inflation won’t keep the Federal Reserve from raising interest rates again.
Futures on equity benchmarks in Japan and Hong Kong retreated, while contracts for Australia were little changed. US futures were slightly lower in early Asian trading after both the S&P 500 and tech-heavy Nasdaq 100 closed Wednesday near session lows.
The Aussie and yen both traded in narrow ranges, holding gains made Wednesday when the dollar weakened following the inflation report.
Treasuries rose in the New York session but ended off session highs. Swaps markets showed the odds are still in favor of a quarter-point Fed hike in May, while traders amped up bets the central bank will cut rates later this year.
US stocks rallied at the start of trading Wednesday after data showed headline US consumer prices rose less than economists forecast, while the closely watched core CPI number — which excludes food and energy — increased 0.4%, meeting estimates and down from the prior month’s 0.5% gain. But those equity gains wavered, with risk sentiment deteriorating in the afternoon session as traders assessed the outlook for inflation, higher rates and economic growth.
“The market is grappling between better news on inflation, which takes pressure off the Fed but also potentially weaker activity data,” said Neil Dutta, head of US economic research at Renaissance Macro Research LLC.
On the economic front in Asia, Australian jobs and Chinese trade data will be in focus. Job growth likely slowed last month in Australia, while the unemployment rate probably ticked higher, according to Bloomberg surveys. For China, trade figures for March may show weaker external demand taking a heavier toll on exports, Bloomberg Intelligence said in a note.
Mild Recession
Minutes of the Fed’s March meeting showed policymakers scaled back their expectations for rate hikes this year after a series of bank collapses roiled markets, and stressed they would remain vigilant for the potential of a credit crunch to further slow the economy. Officials forecast a “mild recession” starting later this year “given their assessment of the potential economic effects of the recent banking-sector developments.”
Read More: Fed Leans Toward Another Hike, Defying Staff’s Recession Outlook
Fed speakers sent mixed messages on the inflation battle on Wednesday. San Francisco Fed President Mary Daly said more rate hikes may not be needed, while Richmond Fed’s Thomas Barkin said “we still have a ways to go.”
Elsewhere, oil settled above $83 a barrel in New York, the highest closing price this year, as slowing flows from Russia, production cuts by OPEC+ and falling US inventories pointed to a tightening market. Bitcoin slumped, dipping back below $30,000 after climbing to the highest since June on Tuesday.
Key events this week:
- China trade, Thursday
- 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
Some of the main moves in markets as of 7:23 a.m. Tokyo time:
Stocks
- S&P 500 futures were little changed. The S&P 500 fell 0.4%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.9%
- S&P/ASX 200 futures were little changed
- Nikkei 225 futures fell 0.7%
- Hang Seng futures fell 1.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro was little changed at $1.0991
- The yen was little changed at 133.20 per dollar
Cryptocurrencies
- Bitcoin was little changed at $29,961.48
- Ether rose 0.3% to $1,915.10
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.39%
Commodities
- West Texas Intermediate crude fell 0.2% to $83.09 a barrel
- Spot gold rose 0.6% to $2,014.93 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna and Cristin Flanagan.
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