(Bloomberg) — Asian stocks looked set for a steady start Wednesday, bolstered by an ongoing recovery in U.S. shares on speculation that the Federal Reserve won’t derail economic growth as it fights inflation.
Futures were higher for Japan and Australia, among the few markets open in Asia due to the Lunar New Year holiday. Economically sensitive sectors like energy and banks helped U.S. stocks to their best three-day rally since 2020.
An exchange-traded fund tracking the Nasdaq 100 rose in extended trading following strong Alphabet Inc. and Advanced Micro Devices Inc. earnings. Starbucks Corp. and PayPal Holdings Inc. slid after they missed estimates.
U.S. Treasuries were mixed, with the 10-year yield edging up, while a dollar gauge retreated. Oil steadied near a seven-year high ahead of a meeting of OPEC and its allies on boosting output. Gold held above $1,800 an ounce.
The latest Federal Reserve commentary hinted at a calibrated approach to raising interest rates to fight high inflation, potentially soothing some investor worries that the economy will take a hit from tighter monetary policy. Those concerns have whipsawed markets this year, leaving global stocks in the red.
St. Louis President James Bullard didn’t push back against market expectations for five hikes this year. But he played down the benefits of a larger-than-expected move, indicating he doesn’t favor a 50 basis-point increase at a policy meeting.
“Fed tightening is still the path forward,” said Dennis DeBusschere, founder of 22V Research. “But a short term rebound in equities will continue — led by growth and cyclicals — as investors focus on a narrative of ‘peak tightening’ ahead of what is likely to be a weak payroll report.”
Officials have lowered expectations for this week’s U.S. payrolls report, saying that brief absences of workers due to the omicron coronavirus strain could overstate the number of unemployed people for last month.
Buy the Dip?
The latest U.S. data on manufacturing and job openings showed a resilient economy that the Fed is trying to cool.
“Stocks probably have a little further to move on the downside before they find a bottom,” Carley Garner, founder of DeCarley Trading, said on Bloomberg Television. But she added “2022’s going to be probably the year to buy any big dip across the board in anything: Treasuries, stocks, commodities, everything.”
Elsewhere, Bitcoin was trading around the highest level in two weeks, hovering near $39,000.
Traders are continuing to monitor tension between the U.S. and Russia over Ukraine. Western officials say Russia has massed more than 100,000 troops near the Ukraine border. Diplomatic talks showed little sign of a breakthrough.
For more market analysis, read our MLIV blog.
What to watch this week:
- Earnings are due from Amazon, Ford Motor, Meta Platforms, Qualcomm, Sony, Spotify
- OPEC+ meeting on output, Wednesday
- Euro zone CPI, Wednesday
- Bank of England, European Central Bank rate decisions, Thursday
- Fed Board of Governors confirmation hearing, Thursday
- U.S. factory orders, initial jobless claims, durable goods, Thursday
- U.S. payrolls report for January, Friday
- Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7%
- The Nasdaq 100 climbed 0.6
- Nikkei 225 futures increased 0.5%
- Australia’s S&P/ASX 200 futures rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro was at $1.1271
- The Japanese yen was at 114.69 per dollar
- The offshore yuan was at 6.3710 per dollar
Bonds
- The yield on 10-year Treasuries advanced one basis point to 1.79%
- Australia’s 10-year yield rose four basis points to 1.94%
Commodities
- West Texas Intermediate crude was at $88.20 a barrel
- Gold was at $1,801.05 an ounce
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