(Bloomberg) — Asian stocks were flat after Federal Reserve officials said they needed more evidence of subdued inflation before cutting interest rates.
Most read articles on Bloomberg
Stock indexes in Hong Kong and mainland China fell at the open. Shares fell in Australia but rose in Taiwan, Japan and South Korea. Asian stock indexes were little changed. In Asia, U.S. futures steadied after Nvidia shares rebounded on Tuesday. The Australian dollar rose after inflation data beat expectations.
U.S. consumer confidence has weakened on weakening prospects for the economy, the job market and incomes. Fed President Michelle Bowman said she sees some upside risks to the inflation outlook. Fed President Lisa Cook said it would be appropriate to cut interest rates “at some point,” adding that she expects inflation to improve gradually this year.The dollar edged up slightly on Wednesday.
Australia recorded higher-than-expected inflation in May, suggesting that price pressures remain strong and entrenched, strengthening the case for the Reserve Bank of Australia to resume interest rate hikes.The yen is trading just below the psychologically important 160 yen level against the U.S. dollar, below which a drop would likely raise concerns about intervention.
“Event risk is limited across the region today,” said Kyle Roda, market analyst at Capital.com, “but the yen is approaching 160, the level at which Japanese authorities intervened in the market.”
China has loosened controls on the yuan, which has been trading near the lower end of its fixed daily range. A separate survey showed China’s export outlook is improving, helping to support growth in the world’s second-largest economy even as consumer spending slows. The yuan is trading near its lowest level against the dollar since November.
In Japan, the central bank is expected to raise interest rates in July, according to a third of economists surveyed by Bloomberg, when it also unveils a roadmap for quantitative tightening.The next big blow to the yen — and a potential trigger for intervention from Japan — could be the release of the Fed’s preferred U.S. inflation reading on Friday, traders said.
“Finalizing the details of tapering bond purchases is unlikely to be a constraint on a rate hike in July,” Ayako Fujita, chief Japan economist at JPMorgan Securities, said in response to a survey. “The emergence of rising inflation risks is increasing the cost of postponing an adjustment to excessive monetary easing.”
Elsewhere in Asia, HSBC raised its view on South Korean stocks to overweight from neutral, citing “ample growth opportunities in the memory sector and expectations around its ‘value-up’ program.”
Extended Rally
In the U.S. market, Nvidia rose about 7% after a $430 billion sell-off. In late trading, FedEx, a barometer of economic growth, rose about 15% on a bullish outlook. In other corporate news, Rivian Automotive surged after Volkswagen AG said it would invest $5 billion to set up a joint venture with the electric car maker.
As the Fed moves closer to cutting interest rates, investors are likely to continue flocking to U.S. stocks on any signs of a rate cut, according to Societe Generale SA, which sees an easing cycle beginning early next year.
“We don’t think the current bull market will collapse until we either enter a recession or the Fed reverses course from potential rate cuts to actual rate hikes,” said Chris Zaccarelli of Independent Advisor Alliance. “We expect volatility between now and the end of the year, but we don’t see the bull market ending unless something changes in the economy or the Fed’s stance.”
UBS said the recent sell-off in Nvidia shares does not reflect a worsening outlook for technology or the broader market, and other signs of demand are positive.
“The Nvidia correction should not be misconstrued as a warning signal for the structural AI investment case or the overall equity outlook,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, wrote in a note.
Meanwhile, crude oil prices held back after an industry report suggested a small increase in U.S. crude inventories ahead of the release of official government data.
Major events this week:
-
U.S. new home sales Wednesday
-
China industrial profits Thursday
-
Eurozone economic confidence, consumer confidence on Thursday
-
U.S. durable goods, jobless claims, GDP on Thursday
-
Nike reports earnings on Thursday
-
Japan Tokyo Consumer Price Index, unemployment rate, industrial production, Friday
-
US PCE Inflation, Spending and Income, University of Michigan Consumer Confidence, Friday
-
Fed President Thomas Barkin to speak on Friday
Some of the key market developments:
stock
-
S&P 500 futures were little changed as of 10:34 a.m. Tokyo time.
-
Japan’s TOPIX rises 0.4%
-
Australia’s S&P/ASX 200 fell 0.9%
-
Hong Kong’s Hang Seng Index fell 0.5%
-
The Shanghai Composite Index fell 0.3%
-
Euro Stoxx 50 futures up 0.4%
currency
-
The Bloomberg Dollar Spot Index was little changed.
-
The euro was unchanged at $1.0714
-
The Japanese yen was almost unchanged at 159.85 yen to the dollar.
-
The offshore yuan was little changed at 7.2887 per dollar.
Cryptocurrency
-
Bitcoin little changed at $61,920.12
-
Ether fell 0.2% to $3,403.7.
Bonds
merchandise
This story was produced with assistance from Bloomberg Automation.
–With assistance from Rob Verdonck.
Most read articles on Bloomberg Businessweek
©2024 Bloomberg LP
