Asian stocks opened mostly higher with a light tailwind from easing inflationary pressure in the US and expectations that central banks can slow the pace of interest rate hikes.
(Bloomberg) — Asian stocks opened mostly higher with a light tailwind from easing inflationary pressure in the US and expectations that central banks can slow the pace of interest rate hikes.
Shares rose in South Korea, Australia and New Zealand, while futures pointed higher in Hong Kong after gains in US indexes. Traders were also awaiting a Bank of Korea interest rate decision with the won near the strongest level since mid 2022.
Shares were mixed in Japan, with the Nikkei 225 lower and the broader Topix index little changed as the outlook for exporters dimmed with the yen’s recent surge. Sentiment was also weakened by the decline in Fast Retailing’s shares after its profit missed estimates.
Japan’s 10-year bond yield rose above the Bank of Japan’s 0.5% ceiling amid speculation the BOJ will review the side effects of its ultra-loose monetary policy. The yen extended on its 2.5% rally from Thursday
Treasury yields were little changed in early Asian trade. Bond yields declined in Australia and New Zealand, tracking moves in Treasuries after traders looked past initial disappointment with an in-line US consumer price index to focus on the idea that aggressive monetary policy may be gradually achieving its desired results.
The swap market is showing less than 50 basis points of tightening priced in for the next two Fed gatherings: a small chance of no move at all in March.
The slowest US inflation rate in 14 months also helped buoy commodities, which have rallied this week on the back of growing confidence in China’s recovery. Oil headed for a weekly gain of around 6%.
Resilient US consumer demand, particularly for services, combined with a tight labor market is a significant threat to prices. But the CPI figures overall show things seem to be going in the right direction, paving the way for the Fed to downshift to a quarter-point hike at its next meeting.
Some US officials have signaled openness to making a 25 basis-point rate increase right at their next meeting, while also stressing the Fed still has more work to do to tame prices — and not anticipating any rate cuts this year.
Despite the downshift signals, the Fed may continue to push too aggressively to tighten, leading to an overshoot of the inflation target of 2%, according to Adam Coons, chief portfolio manager at Winthrop Capital Management.
“The Fed will go down this path of tightening, no pivots of any kind. Maybe a pause at best,” he said on Bloomberg Television. “It could mean a lot of pressure for equity markets” when an earnings recession is also likely in the first half in the US, he said.
Elsewhere in markets, gold headed for a fourth weekly gain after breaching the $1,900-an-ounce mark in the wake of the release of the US inflation data.
Key events this week:
- Bank of Korea’s rate decision, Friday
- China trade, Friday
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo report earnings, Friday
This week’s MLIVE Pulse Survey:
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 9:33 a.m. Tokyo time. S&P 500 rose 0.3%
- Nasdaq 100 futures were little changed. Nasdaq 100 rose 0.5%
- Japan’s Topix index was little changed
- South Korea’s Kospi index rose 1%
- Australia’s S&P/ASX 200 rose 1%
- Hong Kong’s Hang Seng futures rose 0.7%
Currencies
- Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0859
- The Japanese yen was little changed at 129.20 per dollar
- The offshore yuan was little changed at 6.7250 per dollar
Cryptocurrencies
- Bitcoin was little changed at $18,829.82
- Ether fell 1.1% to $1,410.51
Bonds
- The yield on 10-year Treasuries was little changed at 3.45%
- The Japanese 10-year yield rose 3 basis points to 0.53%
- Australia’s 10-year yield declined eight basis points to 3.52%
Commodities
- West Texas Intermediate crude fell 0.1% to $78.31 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.