Asian stocks played catch-up to a sharp rally in US and European equities that began to fade as fledgling hope that central banks would temper the pace of interest rate increases slipped further from view.
(Bloomberg) — Asian stocks played catch-up to a sharp rally in US and European equities that began to fade as fledgling hope that central banks would temper the pace of interest rate increases slipped further from view.
US and European equity futures fell on Wednesday, taking the shine off the best two-day run for the S&P 500 since March 2020 and the strongest session for European stocks in six months. Equities gained ground across Asia. Shares in Australia and Japan traded higher and Hong Kong stocks headed for their best session since March after a one-day break.
The action reflects the seesawing outlook on monetary policy as investors scan central bank commentary and economic data for signs interest rates will begin to peak.
A decline in US job openings helped stoke such a sentiment on Tuesday, which was dimmed by comments from a Federal Reserve official who indicated further tightening lay ahead. The Reserve Bank of New Zealand hiked rates to the highest level since 2015, as expected, failing to mirror its Australian counterpart, which slowed the pace of increases on Tuesday in a surprise that lifted risk assets.
“It’s a dangerous bet to make that last Friday’s bottom was the ultimate bottom,” said Charles Lemonides, founder of hedge fund ValueWorks. “We’re probably in the middle of an important relief rally but the Fed has said they will keep tightening until inflation is out of the system.”
The Bloomberg Dollar Spot Index inched lower and has fallen 3% from a peak last week. The pound fell after climbing on Tuesday to the highest level in two weeks. The price of oil eased lower after jumping on Tuesday as OPEC+ said it was considering an output cut of as much as 2 million barrels a day, double prior estimates.
Rising fears of a recession may benefit traditional havens including Treasuries and the Japanese yen, according to Fidelity International, which said Treasuries make up about 2% of the firm’s global multi-asset income fund, up from zero just a few months ago.
Investors will be keenly focused on Friday’s US jobs data that economists anticipate is set to show a slowing in new jobs added.
“For the market to continue higher, the jobs data will have to be in-line with, or short of expectations,” said Lindsey Bell, chief markets and money strategist at Ally. The market is currently anticipating a “goldilocks” labor-market report that’s “not too hot and not too cold.”
Key events this week:
- Eurozone services PMIs, Wednesday
- OPEC+ meeting begins, Wednesday
- Fed’s Raphael Bostic speaks, Wednesday
- The Reserve Bank of New Zealand meets, Wednesday
- Eurozone retail sales, Thursday
- US initial jobless claims, Thursday
- Fed’s Charles Evans, Lisa Cook, Loretta Mester speak at events, Thursday
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
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Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.4% as of 2.35 p.m. in Tokyo. The S&P 500 added 3.1%
- Nasdaq 100 futures fell 0.4%. The Nasdaq 100 gained 3.1%
- Japan’s Topix climbed 0.4%
- Australia’s S&P/ASX 200 added 1.7%
- Hong Kong’s Hang Seng index jumped 6%
- South Korea’s Kospi index added 0.3%
- Euro Stoxx 50 futures fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index climbed 0.1%
- The Japanese yen traded flat at 144.10 per dollar
- The offshore yuan was flat at 7.0441 per dollar
- The euro fell 0.1% to $0.9975
Cryptocurrencies
- Bitcoin fell 0.8% to $20,178.96
- Ether dropped 0.6% to $1,353.19
Bonds
- The yield on 10-year Treasuries fell one basis points to 3.62%
- Australia’s 10-year yield fell three basis points to 3.64%
Commodities
- West Texas Intermediate crude fell 0.2% $86.36 a barrel
- Gold futures fell slightly to $1,720.91 an ounce
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