Asian stocks inched up following their worst sell-off in two weeks after US equities rebounded as investors weigh the prospect of large interest rate hikes by the Federal Reserve. The dollar was little changed.
(Bloomberg) — Asian stocks inched up following their worst sell-off in two weeks after US equities rebounded as investors weigh the prospect of large interest rate hikes by the Federal Reserve. The dollar was little changed.
Benchmarks in Japan, Australia and South Korea rose. Indexes in Hong Kong and the mainland also advanced after the People’s Bank of China kept its key rate unchanged. US futures climbed after the S&P 500 closed in the green thanks to dip buyers late in the session.
The subdued tone comes as data showed US producer prices fell for a second month, providing some relief after the jolt from consumer-price figures that prompted investors to ratchet up wagers for rate increases. 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 rise in rate-sensitive Treasuries on Wednesday 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 remain at risk from a strong greenback. The yen held around 143 per dollar, having rallied from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention. The offshore yuan remains close to the 7 level versus the dollar.
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.
What’s your dollar bet ahead of the Fed decision? This week’s MLIV Pulse survey asks about the best trades ahead of the FOMC meeting. Please click here to share your views anonymously.
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
- S&P 500 futures contracts rose 0.2% as of 10:52 a.m. in Tokyo. The underlying gauge rose 0.3% on Wednesday
- Nasdaq 100 futures rose 0.2% after a gain of 0.8% for the index
- Australia’s S&P/ASX 200 rose 0.6%
- Japan’s Topix gained 0.2%
- Hang Seng Index rose 0.6%
- Kospi index climbed 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little change. It fell 0.2% on Wednesday
- The euro was little changed at $0.9978
- The yen was steady at 143.01 per dollar
- The offshore yuan traded at 6.9702 versus the dollar
Bonds
- The yield on 10-year Treasuries was little changed at 3.41%
- The yield on 10-year Australian debt was steady at 3.64%
Commodities
- West Texas Intermediate crude rose 0.2% to $88.61 a barrel
- Gold was at $1,696.33 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
