Asian stock benchmarks fluctuated Tuesday as investors weighed weak factory data against inflation concerns fueled by OPEC+’s surprise plan to cut oil output.
(Bloomberg) — Asian stock benchmarks fluctuated Tuesday as investors weighed weak factory data against inflation concerns fueled by OPEC+’s surprise plan to cut oil output.
Benchmark indexes in Japan and Australia moved between small gains and losses, South Korea’s Kospi rose and Hong Kong futures pointed to little change. US equity contracts slipped fractionally following a mixed session on Wall Street.
Treasuries steadied after being at the center of the action in the US session. Policy-sensitive two-year yields reversed gains of as much as 11 basis points Monday and ended six basis points lower after a measure of US factory activity contracted by more than expected. That came after figures earlier in the day showed China’s manufacturing activity unexpectedly eased.
While such data is tempering inflation concerns despite expected energy hikes after the cartel’s production cut, it also shows the darkening economic outlook is spreading to Asia.
One test for the region comes in Australia later Tuesday, with the central bank to decide whether to raise interest rates for an 11th consecutive meeting or pause its most aggressive tightening cycle since 1989. Economists are divided over which way it will go while traders have been positioning for rates to stay on hold.
In the US, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg Television that OPEC+’s decision to cut output was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging. “Whether it will have a lasting impact I think is an open question,” he said.
The Institute for Supply Management’s gauge of US manufacturing activity decreased to 46.3 in March, below the median estimate of 47.5 in a Bloomberg survey of economists. Readings below 50 indicate contraction. Measures of new orders and employment retreated.
As the possibility of a recession looks more certain, the upcoming earnings season may be the first of challenging quarters.
“We would expect to have a cap on future market appreciation in the short term here in the States,” Karen Robbins, senior vice president for wealth management at UBS, said on Bloomberg Television. OPEC’s oil output cut is going to be a real issue for the Fed, prompting the central bank to raise rates again in May, Robbins said.
JPMorgan Chase & Co. strategist Marko Kolanovic reiterated the bank’s underweight call on equities in a note to clients, warning that “stocks are set to weaken for the remainder of the year” as headwinds from banking turbulence, oil shocks, and slowing growth linger.
Energy shares led gains in S&P 500 Monday, with US crude rallying the most in more than a year hitting $80 a barrel. The Nasdaq 100 underperformed major benchmarks as Tesla Inc. sank on data showing its price cuts barely boosted deliveries.
Australian bond yields dropped, with both the three-year and 10-year maturities down about six basis points, largely in line with moves in Treasuries, with yields down across tenors.
Australian dollar was little changed after a 1.5% gain Monday and a gauge of greenback strength was also flat after a 0.4% decline. Meanwhile, the Hong Kong Monetary Authority bought the local dollar for the first time since mid-February after the currency slid past the weak end of its trading band.
South Korean inflation eased more than expected in March, reducing pressure on the central bank to resume policy tightening.
Further into the week, the US government’s monthly employment report will be released Friday and will give a fuller picture of the job market. Swaps linked to Fed interest-rate expectations showed a quarter-point hike in May as more likely than not.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Australia rate decision, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:29 a.m. Tokyo time. The S&P 500 rose 0.4%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 fell 0.3%
- Japan’s Topix index rose 0.1%
- Australia’s S&P/ASX 200 Index rose 0.2%
- Hong Kong’s Hang Seng futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0906
- The Japanese yen was little changed at 132.43 per dollar
- The offshore yuan was little changed at 6.8726 per dollar
- The Australian dollar was little changed at $0.6791
Cryptocurrencies
- Bitcoin rose 0.8% to $27,804.58
- Ether rose 1.7% to $1,811.31
Bonds
- The yield on 10-year Treasuries was little changed at 3.42%
- Australia’s 10-year yield declined five basis points to 3.27%
Commodities
- West Texas Intermediate crude rose 0.1% to $80.53 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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