Asian stocks rise, dollar eases ahead of US inflation data -December 12, 2023 at 01:28 am EST
SINGAPORE, Dec 12 (Reuters) – Asian shares rose on
Tuesday while the dollar drifted lower as investors stayed
cautious ahead of a crucial U.S. inflation report later in the
day that will set the tone for a week filled with central bank
meetings.
The U.S. Federal Reserve is widely expected to hold rates on
Wednesday, with the spotlight squarely on comments from Chair
Jerome Powell during his press conference as well as the central
bank’s dot plot and economic projections.
Before that, the U.S. Labor Department’s Consumer Price
Index (CPI) report later on Tuesday is expected to show
inflation still cooling but staying well above the Fed’s 2%
annual target, with core CPI expected to come in at 4%.
That has meant investors are hesitant in placing major bets,
with futures indicating European stock markets are set for a
muted open. Eurostoxx 50 futures was up 0.11%, German
DAX futures 0.17% higher and FTSE futures up
0.06%.
In Asia, MSCI’s broadest index of Asia-Pacific shares
outside Japan rose 0.54%.
“I think a soft landing is now firmly priced into markets
and quickly becoming the consensus outlook for 2024,” said Ben
Bennett, APAC investment strategist for Legal and General
Investment Management (LGIM).
“So if the data strays far from that path, there could
be some disappointment.”
A slew of economic data along with comments from Fed
officials stoked expectations at the start of the month that the
Fed would start cutting rates early next year, but investors
have since dialled back some of those expectations.
Markets are now pricing in a 48% chance of a rate cut in
March compared with 57% a week earlier, according to CME
FedWatch tool. Markets, though, have priced in a 75% chance of a
cut in May.
Financial conditions have loosened since the last Fed
meeting at the start of November and that will likely weigh on
the central bank’s thinking, analysts say.
“The Fed will feel that it cannot afford to have
financial conditions ease further, as that could potentially
re-accelerate labour demand and put renewed upward pressure on
the rate of consumer inflation,” said Erik Weisman, chief
economist and portfolio manager at MFS Investment Management.
“Whether the market takes the hint remains to be seen
and will likely be driven by the unfolding macro data more than
Fed jawboning.”
In a busy week for central bankers, the European Central
Bank, Bank of England, Norges Bank and the Swiss National Bank
all meet on Thursday.
In Asia, China’s blue-chip stocks eased 0.11%,
while Hong Kong’s Hang Seng index rose 0.60% as investors
looked for signs of policy support after data showed China’s
November consumer prices posted their fastest fall in three
years.
The yield on 10-year Treasury notes fell 3.1
basis points to 4.208% after a lacklustre three- and 10-year
note auctions on Monday.
Investors were reluctant to buy Treasuries in the auctions
given thinner liquidity with the inflation data and the Fed
meeting on the horizon this week.
The Treasury Department will sell $21 billion in 30-year
reopened bonds on Tuesday, following Monday’s auction of $50
billion in reopened three-year notes and $37 billion in 10-year
notes.
In currency markets, the Japanese yen remained in
the spotlight as expectations that the Bank of Japan was ready
to walk away from its ultra loose monetary policy faded after
Bloomberg reported on Monday, citing sources, that BOJ officials
see little need to rush out of negative rates.
The yen strengthened 0.54% to 145.39 per dollar, recouping
some of the steep overnight losses. The BOJ is due to meet next
week.
The dollar index, which measures the U.S. currency
against six rivals including yen, fell 0.135% to 103.92.
Gold prices edged higher after touching a three-week
low in the previous session and were last at $1,987.49 an ounce.
U.S. crude rose 0.7% to $71.82 per barrel and Brent
was at $76.51, up 0.63% on the day.
(Reporting by Ankur Banerjee; Editing by Lincoln Feast and Kim
Coghill)
