Asia Stocks Set for Choppy Open on CPI, Fed Speak: Markets Wrap

(Bloomberg) — Stocks in Asia are primed for a cautious open after a choppy day on Wall Street ended flat as investors balanced hot inflation data with Federal Reserve commentary suggesting US interest rates may soon peak.

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Shares in Australia fell and equity futures in Japan and Hong Kong inched higher. US futures edged lower in early Asian trading. The S&P 500 ended Tuesday little changed while the tech-heavy Nasdaq 100, which is more sensitive to higher interest rates, rose 0.7%.

Australian and New Zealand bond yields climbed higher. The two-year Treasury yield rose 10 basis points to the highest level since November, while the 10-year rose four basis points to levels not seen since the start of the year.

The moves were driven by US CPI data that showed prices rose 0.5% in January, more than the 0.4% forecast by economists, and subsequent comments from policymakers.

Federal Reserve Bank of Philadelphia President Patrick Harker said the the Fed was nearing the point where rates were restrictive enough. “In my view, we are not done yet,” he said. “But we are likely close.”

Harker’s Richmond Fed counterpart Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”

Equity bulls were also encouraged by one falling component of the CPI print. Core services minus housing, a measure singled out by Fed Chair Jerome Powell in the past, came in at a slower 0.3% pace in the month.

“Stocks are probably rising due to Harker,” said Steve Sosnick, chief strategist at Interactive Brokers. “Close to done on tightening is vague, but certainly not a hawkish tone.”

The dollar was largely unchanged and the yen opened flat after weakening over the past two days. Oil fell for a second day after the announcement that the US was selling more crude from its strategic reserves.

The PBOC is expected to hold its key one-year MLF interest rate at 2.75% later today, according to consensus estimates, as Lunar New Year period numbers suggest a recovery in consumption.

Key events:

• US retail sales, UK CPI Wednesday

• US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday

• France CPI, Russia GDP Friday

Some of the main moves in markets as of 8:14 a.m. Tokyo time:

Stocks

• S&P 500 futures fell 0.2%. The S&P 500 fell 0.03%

• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 0.7%

• Nikkei 225 futures rose 0.3%

• Hang Seng futures were little changed

• Australia’s S&P/ASX 200 fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0734

• The Japanese yen was little changed at 133.10 per dollar

• The offshore yuan was little changed at 6.8369 per dollar

Cryptocurrencies

• Bitcoin was little changed at $22,248.4

• Ether rose 0.3% to $1,560.91

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.74%

• Australia’s 10-year yield advanced seven basis points to 3.80%

Commodities

• West Texas Intermediate crude fell 0.3% to $78.80 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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