Asian shares were mostly higher in choppy trading on Friday, with a light tailwind from easing inflationary pressure in the US.
(Bloomberg) — Asian shares were mostly higher in choppy trading on Friday, with a light tailwind from easing inflationary pressure in the US.
While expectations that central banks will slow the pace of interest rate hikes helped a gauge of the region’s equities toward a third-straight week of gains, Hong Kong’s benchmark index fluctuated and Japanese stocks fell. Philippine stocks rose, putting the nation’s benchmark index on course to enter a bull market.
Shares of Hong Kong-listed tech companies swung between gains and losses as investors digested news that China plans to take “golden shares” in the local units of Alibaba and Tencent, a move that may give the government more control of the strategic sector.
Japan’s Topix fell as the outlook for exporters dimmed with the yen’s recent surge. Sentiment was also damped by a slump 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 was little changed after its 2.5% rally Thursday
The won trimmed a gain after the Bank of Korea raised its benchmark interest rate in what may be its last hike during its 18-month tightening cycle as economic concerns come to the fore.
Treasury yields rose slightly after dropping in the US session. Bond yields declined in Australia and New Zealand, tracking moves in US rates. 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 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, oil headed for a weekly gain and gold was set for a fourth weekly advance after breaching the $1,900-an-ounce mark in the wake of the release of the US inflation data.
Key events this week:
- 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 fell 0.2% as of 12:01 p.m. Tokyo time. S&P 500 rose 0.3%
- Nasdaq 100 futures fell 0.4%. Nasdaq 100 rose 0.5%
- Japan’s Topix index fell 0.2%
- South Korea’s Kospi index rose 0.7%
- Hong Kong’s Hang Seng Index was little changed
- China’s Shanghai Composite Index rose 0.6%
- Australia’s S&P/ASX 200 rose 0.7%
Currencies
- Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0847
- The Japanese yen rose 0.1% to 129.11 per dollar
- The offshore yuan fell 0.1% to 6.7344 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $18,836.60
- Ether fell 1.2% to $1,408.06
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.46%
- Japan’s 10-year yield advanced three and a half basis points to 0.53.5%
- Australia’s 10-year yield declined four basis points to 3.56%
Commodities
- West Texas Intermediate crude fell 0.4% to $78.09 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth and Rob Verdonck.
More stories like this are available on bloomberg.com
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