Asian stocks ease ahead of US inflation data, Fed minutes

SINGAPORE, April 12 (Reuters) – Asian shares fell on Wednesday ahead of a U.S. inflation report that will affect how soon the Federal Reserve ends its aggressive rate hikes, with markets betting on at least one more at next month’s policy meeting. .

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) traded 0.17% lower, snapping its three-day winning streak.

The dovish mood looked set to continue in Europe, with the future pointing to a broadly less open outlook. Eurostoxx 50 futures were down 0.16%, German DAX futures were down 0.01% and FTSE futures were down 0.07%.

After Friday’s jobs report showed a resilience in the US labor market, fueling calls for a 25 basis point hike at the Fed’s next meeting in May, investors’ focus remains firmly on the March inflation report later that day.

The consumer price index is expected to have risen 0.4% on a monthly basis and 5.6% on a year-over-year basis, according to a Reuters poll of economists.

“The focus will shift from falling inflation to underlying inflationary pressures and how sticky that will be, which will have an impact on how long the Fed will have to leave interest rates higher,” said Shane Oliver, head of investment strategy. at AMP Capital in Sydney.

Oliver says the narrative shifts from inflation to the risk of a recession, which markets are not particularly concerned about at the moment because it has been talked about for so long that it hasn’t happened yet.

Markets are now pricing in a 66% chance the Fed will raise interest rates by 25 basis points in May, according to the CME FedWatch tool.

See also  California Weather: Monterey Peninsula becomes an island as storms cause flooding in California

Philadelphia Federal Reserve Bank President Patrick Harger said on Tuesday he thinks the US central bank may raise interest rates soon, but reiterated its desire to bring inflation back to its 2% target.

The central bank last month raised interest rates by a quarter percentage point to a range of 4.75% to 5.00%.

“I get up after 5 o’clock and sit there for a while and camp,” Harker said.

Minutes of its March meeting are due to be released later in the day, and investors will be poring over them for clues about the central bank’s monetary path and the impact of pressure on the banking sector.

The International Monetary Fund warned on Tuesday that lurking financial system vulnerabilities could erupt into a new crisis and cut global growth forecasts for 2023, slowing global growth this year.

Turmoil in the banking sector following the failure of Silicon Bank and Signature Bank has fueled some expectations that the central bank will cut interest rates to ease some of the pressure on the market. .

The oil production cuts announced by the OPEC+ group last week also stoked fears of a rise in inflation, and investors at Saxo Markets said there would need to be a clear drop in prices for services to really ease their worries about inflation.

“We don’t think we’re there yet. As oil prices rebound and the labor market gradually cools, the risk of core inflation rising for a longer period of time is tilted,” they said.

China stocks were mixed, with the Shanghai Composite Index (.SSEC) up 0.4%, while Hong Kong’s Hang Seng Index (.HSI) fell 1.2%, as investors weighed rising geopolitical tensions.

See also  Millis throw integrated no-hitter vs. Billis

China said on Wednesday that President Tsai Ing-wen was pushing Taiwan into “stormy seas” after Beijing held military exercises in response to Tsai’s recent meeting with US House Speaker Kevin McCarthy in California.

Tsai said the meeting with McCarthy in the U.S. and the overseas trip, which included stops in Guatemala and Belize, showed Taiwan’s determination to defend freedom and democracy.

Elsewhere in Asia, Japan’s Nikkei (.N225) was 0.6% higher, while Australia’s S&P/ASX 200 index (.AXJO) rose 0.41%.

In currency markets, the dollar index, which measures the U.S. currency against six rivals, fell 0.049%. The euro rose 0.12% to $1.0923, while sterling last traded at $1.2435, up 0.09% on the day.

The yen was down 0.09% at 133.80 per dollar. Allowing the Bank of Japan more flexibility in its bond yield curve controls will help prevent sudden policy changes later, the IMF said.

U.S. crude was up 0.06% at $81.58 a barrel, while Brent was up 0.05% at $85.65.

Spot gold rose 0.8% to $2,018.25 an ounce. U.S. gold futures rose 0.55% to $2,015.90 an ounce.

Report by Ankur Banerjee; Editing: Christopher Cushing & Simon Cameron-Moore

Our Standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published. Required fields are marked *