Asian stocks fluctuated following their worst sell-off in two weeks after US equities rebounded as investors weighed the prospect of large interest rate hikes by the Federal Reserve. The dollar edged higher.
(Bloomberg) — Asian stocks fluctuated following their worst sell-off in two weeks after US equities rebounded as investors weighed the prospect of large interest rate hikes by the Federal Reserve. The dollar edged higher.
European futures were little changed and US contracts fluctuated after the S&P 500 closed in the green thanks to dip buyers late in the session. The MSCI Asia Pacific Index erased earlier gains to fall as much as 0.4% as China dragged the region lower.
Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.
“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”
Swaps traders are pricing in a hike of three-quarters of a percentage point when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.
Read More: US 2- to 30-Year Curve Reaches Most Inverted Level This Century
While the magnitude of the stock rout was impressive following hot US inflation data, the S&P 500 only reversed most of the gains made in the previous four sessions. The lack of a surge in the VIX index — known as the “fear gauge” — suggests that the selloff was a recalibration of those expectations rather than panic selling.
Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
The offshore yuan was close to the 7 level versus the dollar after the central bank drained liquidity from the banking system for a second straight month while leaving rates unchanged as it sought to ease pressure on the currency.
Crude oil fluctuated amid optimism for demand with China easing Covid restrictions in the megacity of Chengdu. Natural gas futures surged the most among major US-traded commodities as hot weather forecasts and a looming rail strike added to concern about tight supplies ahead of winter.
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Here are some key events to watch this week:
- US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
- China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
- Euro area CPI, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 7:20 a.m. London time
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 1.8%
- The MSCI Emerging Markets Index fell 1.8%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to $0.9960
- The Japanese yen fell 0.4% to 143.62 per dollar
- The offshore yuan was little changed at 6.9763 per dollar
- The British pound fell 0.2% to $1.1512
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.44%
- Germany’s 10-year yield declined one basis point to 1.72%
- Britain’s 10-year yield declined four basis points to 3.13%
Commodities
- Brent crude fell 0.1% to $93.98 a barrel
- Spot gold fell 0.5% to $1,688.52 an ounce
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