(Bloomberg) — Asian stocks were steady Wednesday as traders evaluated China’s economic growth outlook and braced for the Federal Reserve to unveil a faster withdrawal of monetary stimulus to tackle high inflation.
Shares rose in Japan and fluctuated in China and Hong Kong. Chinese new home prices posted a monthly drop, while other data such as retail sales and industrial output painted a mixed picture amid the property downturn and subdued consumption. The nation’s central bank rolled over part of the policy loans maturing this month.
U.S.-China tension also continues to bubble in the background: the Biden administration is considering imposing tougher sanctions on Semiconductor Manufacturing International Corp., China’s largest chipmaker. That’s part of an effort to limit limit the country’s access to advanced technology.
S&P 500 and Nasdaq 100 futures wavered after technology shares led a Wall Street drop Tuesday as investors soured on costlier parts of the stock market. Concerns about the omicron virus variant continue to shadow trading too. Treasury yields and the dollar edged lower.
U.S. producer-price inflation hit a record of almost 10%, underlining the cost pressures rattling the American economy. The Fed on Wednesday is set to unveil a quicker tapering of bond purchases, paving the way for interest-rate hikes next year. The mix of high inflation, diminishing central bank support and omicron uncertainty is testing markets.
“We expect the markets to be volatile primarily because of the back and forth on the Covid news” and “worries again about inflation,” Rebecca Felton, RiverFront Investment Group senior market strategist, said on Bloomberg Television. “High valuations and uneven data are probably what we are going to see for the next couple of months.”
Elsewhere, oil fell for a third day. The International Energy Agency said the global market had already returned to surplus. Moreover, mobility curbs to tackle omicron risk hurting demand.
Virus Curbs
The World Health Organization is concerned omicron is being dismissed as mild, even as it spreads faster than any previous Covid-19 strain. Italy, Scotland and the Netherlands are tightening restrictions, while South Korea is strengthening social-distancing measures.
The flattening in the U.S. Treasury yield curve this year could be pointing to a more challenging economic period ahead amid the panoply of risks.
“The yield curve is kind of sniffing out a policy mistake,” Nancy Tengler, chief investment officer at Laffer Tengler Investments Inc., said on Bloomberg Television. The long end of the curve “is forecasting slowing growth beyond what we expect to see next year” and the Fed erred by failing to begin tapering stimulus sooner, she said.
Meanwhile, the U.S. Senate voted to raise the nation’s debt ceiling by $2.5 trillion, an amount intended to extend the government’s borrowing authority until early 2023.
Here are some key events this week:
- China releases November industrial output, retail sales data, Wednesday.
- Fed rate decision, Wednesday.
- U.S. business inventories, retail sales, empire manufacturing, Wednesday.
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- U.S. housing starts, initial jobless claims, industrial production, Thursday.
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
- “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 11:05 a.m. in Tokyo. The S&P 500 fell 0.8%
- Nasdaq 100 futures were steady. The Nasdaq 100 fell 1%
- Japan’s Topix index rose 0.5%
- Australia’s S&P/ASX 200 index shed 0.6%
- South Korea’s Kospi index lost 0.1%
- Hong Kong’s Hang Seng index rose 0.3%
- China’s Shanghai Composite index added 0.1%
- Euro Stoxx 50 futures increased 0.3%
Currencies
- The Japanese yen was at 113.71 per dollar
- The offshore yuan was at 6.3709 per dollar
- The Bloomberg Dollar Spot Index fell about 0.1%
- The euro was at to $1.1267
Bonds
- The yield on 10-year Treasuries was at 1.43%
- Australia’s 10-year bond yield rose three basis points to 1.57%
Commodities
- West Texas Intermediate crude fell 0.8% to $70.18 a barrel
- Gold was at $1,772.91 an ounce, up 0.1%
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