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Asian stocks mixed as Hawkish Fed halts S&P rally: Markets over


(Bloomberg) — Asian stocks were mixed on Tuesday after the rally in US shares faded as Federal Reserve officials signaled that the central bank may need to raise interest rates. above 5% before pausing and staying the same for a while.

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Shares in Australia, Hong Kong and mainland China fell, while Japan’s Topix Index rose after reopening after the holiday. Contracts on the S&P 500 were little changed after the index failed to sustain above the key 3,900 level, erasing gains of nearly 1.5% on Monday.

Traders’ hopes for a quick end to a strong interest rate hike as global inflation cools did a reality check on Monday, as Bank of San Francisco Fed President Mary Daly said she hopes the central bank interest rates will increase by more than 5%. His Atlanta counterpart, Raphael Bostic, noted that policymakers should raise rates above 5 percent early in the second quarter and then hold them there for “a long time.”

That leaves bets on slower growth to wait for Thursday’s US CPI report, which will be released almost a week after the latest jobs data showed wage growth. has decelerated. The figures will be among the last that policymakers will see before January 31 to February 31. 1 gathering.

Nitin Chanduka, strategist at Bloomberg Intelligence, said: “After the strong rally, Asian markets could see some profit taking amid tighter financial conditions and a bullish outlook. Fed rates have no respite. “Expectations for China are improving, but economic data may not be authentic until the country’s rampant Covid outbreak is on track.”

The Dow Jones Industrial Average underperformed on Monday, while the Nasdaq 100 rallied on gains in big tech stocks, with Tesla Inc. increased by about 6%. Asia’s technology-reliant stock markets rallied, with stocks in South Korea and Taiwan rallying.

“Aside from the possibility that interest rates remain high and a recession is possible, any bullish trend triggered by slowing inflation could be delayed,” said Chris Larkin at E*Trade from Morgan Stanley. offset by stocks that are still overvalued and earnings expectations too optimistic.” “It can be a recipe for volatile short-term and long-term trading.”

The dollar weakened against most Group 10 currencies on Tuesday. The yield on the 10-year Treasury note fell one basis point. Japan’s 10-year interest rate remained at 0.5%, the ceiling for the Bank of Japan’s yield control policy.

Worries about a recession in the US and Europe this year have been addressed by renewed optimism towards China. The world’s second-largest economy abruptly changed its strict Covid restrictions in early December and quickly followed through with other market-friendly changes. Its economy is now forecast to grow 4.8% this year, according to data compiled by Bloomberg. The MSCI China Index is up about 50% since hitting an 11-year low in October.

Chinese officials are considering a record quota for special local government bonds this year and expanding their budget deficit target as they ramp up support for the economy, according to people familiar with the situation. with this problem.

Stocks in the developing world entered a bull market amid a recovery fueled by optimism about China’s reopening and a weakening dollar. The MSCI Emerging Markets Index gained 2.5% on Monday, lifting its gains from the October 24 low to more than 20%.

This week’s main events:

  • U.S. wholesale inventories, Tuesday

  • Fed Chair Jerome Powell among the speakers at the Riksbank symposium in Stockholm, Tuesday

  • The World Bank is scheduled to release its global economic outlook on Tuesday

  • ECB Governing Council members speak at the Euromoney conference in Vienna, Wednesday

  • US CPI, Initial Jobless Claims, Thursday

  • St Louis Fed President James Bullard at the Wisconsin Bankers Association virtual event, Thursday

  • Richmond Fed President Thomas Barkin speaks in the VBA/VA Room, Thursday

  • Trade China, Friday

  • US University of Michigan Consumer Sentiment, Friday

  • Citigroup, JPMorgan Chase, Wells Fargo report earnings on Friday

This week’s MLIVE pulse survey:

Some of the key market moves at 11:14 a.m. Tokyo time:

share

  • S&P/ASX 200 down 0.2%

  • Hang Seng down 0.2%

  • Japan’s Topix up 0.5%

  • Shanghai Composite fell 0.2%

  • S&P 500 futures were little changed; S&P fell 0.1% on Monday

  • Nasdaq 100 up 0.6% on Monday

electronic money

  • Bitcoin up 1.5% to 17,206.51 USD

  • Ether up 4% to $1,319.87

bonds

Goods

  • West Texas Intermediate crude fell 0.2% to $74.46 per barrel

  • Spot gold fell 0.1% to $1,869.84 an ounce

This story was produced with assistance from Bloomberg Automation.

–With support from Abhishek Vishnoi.

(An earlier version of this story corrected the spelling of the Atlanta Fed official’s name.)

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