A gauge of Asian stocks climbed, following the S&P 500 higher as investors await US midterm elections and inflation data later this week. Chinese shares fell.
(Bloomberg) — A gauge of Asian stocks climbed, following the S&P 500 higher as investors await US midterm elections and inflation data later this week. Chinese shares fell.
Japanese equities led gains in the region, while US and European futures edged up. Technology companies were the biggest losers among Chinese shares, halting their recent rally, as investors considered a jump in virus infections and official comments defending Covid-Zero.
Markets are focused on the elections later Tuesday for potential gridlock in government, which has historically been good for US stocks, and on the consumer price print Thursday for its impact on Federal Reserve interest rate hikes.
The Bloomberg Dollar Spot Index was little changed after recent declines. The gauge fell 0.4% Monday, extending the 1.7% loss from Friday, which was its worst day since March 2020.
The inflation reading is coming after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.
“Inflation is going up. It may be coming down periodically. But it’s going up,” Richard Harris, chief executive of Port Shelter Investment Management, said on Bloomberg Television. “The market is kind of uncertain — it’s hoping for the best but really should be preparing for the worst.”
Yet opinion is divided on the broad outlook for markets and the economies.
Goldman Sachs Group Inc.’s top economist said there was still a “very plausible” path for the US economy to avoid a recession.
JPMorgan Chase & Co.’s Marko Kolanovic warned of the risk to stocks from ongoing Fed hawkishness, and Morgan Stanley’s Mike Wilson said companies will need to aggressively shrink expenses, including through layoffs, before he becomes more optimistic on US equities.
Treasury yields were little changed in Asian trading after rising on Monday. Benchmark Australian and New Zealand government bond yields rose more than 10 basis points.
Japan’s benchmark 10-year bond yields were stuck at the 0.25% upper limit of the central bank’s target range as trading dries up.
The Bank of Japan has been scooping up so many 10-year bonds there may soon be little left to buy. It held 73% of 10-year government notes with a residual maturity of at least seven years as of end-October, according to data compiled by Bloomberg.
Meanwhile, swaps markets are leaning toward a 50 basis-point Fed rate increase in December, after a fourth consecutive jumbo hike to a target range of 3.75% to 4% at last week’s meeting. Rates are expected to peak slightly above 5% around mid-2023.
Key events this week:
- Euro-zone retail sales, Tuesday
- US midterm elections, Tuesday
- EIA oil inventory report, Wednesday
- China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
- US wholesale inventories, MBA mortgage applications, Wednesday
- Fed officials John Williams, Tom Barkin speak at events, Wednesday
- US CPI, US initial jobless claims, Thursday
- Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 11:45 a.m. in Tokyo. The S&P 500 rose 1% Monday
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 1.1%
- Euro Stoxx 50 futures rose 0.1%
- The Hang Seng Index was little changed%
- The Shanghai Composite Index fell 0.4%
- The Topix Index rose 1.1%
- South Korea’s Kospi index rose 0.8%
- Australia’s S&P/ASX 200 Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0013
- The Japanese yen was little changed at 146.65 per dollar
- The offshore yuan fell 0.2% to 7.2478 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $20,645.61
- Ether fell 0.2% to $1,572.25
Bonds
- The yield on 10-year Treasuries was little changed at 4.22%
- Australia’s 10-year yield advanced 14 basis points to 4.05%
Commodities
- West Texas Intermediate crude fell 0.2% to $91.64 a barrel
- Spot gold fell 0.1% to $1,673.17 an ounce
–With assistance from Stephen Kirkland, Vildana Hajric, Jan-Patrick Barnert and Haidi Lun.
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