Global stocks mixed, dollar inches lower before CPI data
Ahead of the US inflation data release, stocks showed a mixed reaction, and the dollar was trading lower on Tuesday
Stocks were mixed while the dollar edged down on Tuesday amid cautious trading ahead of US inflation data that may shape the outlook for interest-rate hikes into next year.
Shares were higher in Japan and Australia, Chinese equities fluctuated and US futures slipped. The S&P 500’s 1.4% gain on Monday wasn’t enough to trigger a convincing rally in Asia as investors also weighed the impact Covid infections in China and tighter restrictions on the nation’s semiconductor industry from the US and its allies.
The dollar saw marginal declines against most of its major counterparts. Treasury yields steadied after gains on Monday that sent the 10-year rate to above 3.6%. Yields for Australian and New Zealand government bonds ticked higher.
Investors will be closely watching the consumer price figures, which are expected to remain elevated even as the rate of increase slows. A subdued CPI print would justify the Federal Reserve’s projected half-point move on Wednesday and shed light on whether markets can expect rate cuts in late 2023.
The release of the inflation data will be more critical than the Fed’s decision, according to Xi Qiao, managing director for global wealth management at UBS Group AG. “It’s all going to depend on CPI numbers, whether the Fed is going to pivot or not,” she said on Bloomberg Television. “With the current inflation situation, a lot of the fundamental challenges that we have right now are going to go into 2023.”
Other central banks are also set to announce their final rate decisions of the year this week. The European Central Bank will announce its rate decision Thursday, and may also opt for a half-point hike. Markets will also contend with decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.
A potential fillip for markets is oil trading around the lowest price this year after prices plunged 11% last week. After gaining 3% on Monday, West Texas Intermediate edged higher to remain above $73 a barrel on Tuesday.
Broader sentiment for China is clouded by Japan and the Netherlands agreeing in principle to at least partially join the US in increasing controls over the export to China of advanced machinery to make semiconductors. Trading of Asian semiconductor stocks was mixed on the news.
On top of this, Beijing’s relaxation of virus controls is causing concern that the nation’s health system may become overloaded, hurting the economy.
Key events this week:
- US CPI, Tuesday
- FOMC rate decision and Fed Chair news conference, Wednesday
- China medium-term lending, property investment, retail sales, industrial production, surveyed jobless, Thursday
- ECB rate decision and ECB President Lagarde briefing, Thursday
- Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday
- US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
- Eurozone S&P Global PMI, CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 10:51 a.m. Tokyo time. The S&P 500 rose 1.4%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 gained 1.2%
- Japan’s Topix index rose 0.5%
- South Korea’s Kospi index rose 0.1%
- Hong Kong’s Hang Seng Index was little changed
- China’s Shanghai Composite Index fell 0.1%
- 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 $1.0546
- The Japanese yen was little changed at 137.65 per dollar
- The offshore yuan was little changed at 6.9835 per dollar
Cryptocurrencies
- Bitcoin fell 0.1% to $17,152.18
- Ether fell 0.6% to $1,267.1
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.60%
- Japan’s 10-year yield was little changed at 0.25%
- Australia’s 10-year yield advanced three basis points to 3.41%
Commodities
- West Texas Intermediate crude rose 0.8% to $73.79 a barrel
- Spot gold rose 0.2% to $1,784.30 an ounce
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