FEBRUARY 9, 2022
Asian stocks were steady Thursday, while U.S. equity futures dipped, as traders awaited inflation data that may shape views on how aggressively the Federal Reserve will tighten monetary policy.
Shares rose in Japan but wavered in Hong Kong and China. The region failed to harness all of the tailwind from Wall Street, where the S&P 500 extended a broad rally Wednesday and the Nasdaq 100 jumped over 2%. Uber Technologies Inc. and Walt Disney Co. gained in late trading on robust earnings.
The 10-year U.S. Treasury yield edged lower in the wake of a strong auction. The gap between two-year and 10-year yields was around the narrowest since October 2020. The dollar ticked higher.
Oil’s rally has stalled around $90 a barrel. Gold was at a two-week high on demand for the metal as a store of value amid concerns over inflation and geopolitical tensions.
U.S. data later Thursday are expected to show inflation exceeding 7%. A higher-than-anticipated reading could stoke bets on a more aggressive Fed liftoff in March and inject further volatility into stocks and bonds.
“The market is being somewhat sanguine about what will happen in the second half of 2022,” Sonal Desai, chief investment officer at Franklin Templeton Fixed Income, wrote in a note. “There is an expectation that inflation will decline sharply. I think that might be optimistic because a lot of the factors driving inflation will still be with us. The Fed is already behind the curve.”
Fed Bank of Cleveland President Loretta Mester and her Atlanta counterpart Raphael Bostic said all options are on the table for the size of policy makers’ first interest-rate increase in March, but Mester doesn’t see a “compelling case” for a 50-basis-point hike.
They indicated they prefer the Fed to start reducing its balance sheet soon. Markets are pricing in more than five quarter-point Fed hikes in 2022.
Some remain skeptical about such bets, such as Bokeh Capital Partners Chief Investment Officer Kim Forrest, who said on Bloomberg Television that she sees expects inflation to ease as government handout programs are removed.
Five to seven Fed hikes “is just so crazy — it’s a lot driven by bond people here who really just want to get that 10-year to the 3% rate and I don’t know that’s possible,” said Forrest, who expects maybe two Fed rate increases in 2022.
In Asia, central banks in India and Indonesia are expected to leave borrowing costs unchanged, even as a global wave of tightening intensifies.
Here are some events to watch this week:
- Earnings: AstraZeneca, Twitter
- U.K. Bank of England Governor Andrew Bailey speaks Thursday
- U.S. consumer price index, initial jobless claims Thursday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
- S&P 500 futures fell 0.2% as of 10:52 a.m. in Tokyo. The S&P 500 rose 1.5%
- Nasdaq 100 futures shed 0.3%. The Nasdaq 100 rose 2.1%
- Japan’s Topix index gained 0.2%
- Australia’s S&P/ASX 200 Index rose 0.3%
- South Korea’s Kospi index climbed 0.1%
- China’s Shanghai Composite index fell 0.3%
- Hong Kong’s Hang Seng Index lost 0.1%
- The Japanese yen was at 115.52 per dollar
- The offshore yuan was at 6.3656 per dollar
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was at $1.1419
- The yield on 10-year Treasuries was at 1.93%, down one basis point
- Australia’s 10-year yield was at 2.10%, up one basis point
- West Texas Intermediate crude rose 0.2% to $89.83 a barrel
- Gold was at $1,833.64 an ounce
Courtesy/Source: The Financial Express