(Bloomberg) — Stocks in Asia are poised to open lower as Federal Reserve officials urged for more evidence of cooling inflation before lowering interest rates.
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Equity futures pointed to declines in Australia and Hong Kong while an index of Chinese shares trading in the US slipped 1.3%. Contracts for Japanese stocks rose. US futures were little changed in Asian trading after a rebound in Nvidia Corp. shares led gains in the “Magnificent Seven” cohort of megacaps on Tuesday. Treasuries barely budged after a $69 billion two-year US sale got the expected yield and good demand, kicking off this week’s trio of auctions.
US consumer confidence eased on a more muted outlook for business conditions, the job market and incomes. Fed Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook. Her colleague Lisa Cook said it will be appropriate to reduce rates “at some point,” adding that she expects inflation to improve gradually this year. The dollar nudged higher Tuesday.
“We believe the bull market we are in isn’t going to be derailed until either we go into recession or the Fed changes interest-rate policy from potential cuts to actual hikes,” said Chris Zaccarelli at Independent Advisor Alliance. “Expect volatility between now and the end of the year, but don’t expect the bull market to end without a change in the economy or Fed posture.”
In Japan, the central bank is expected to raise its interest rate in July in addition to unveiling a roadmap for its path toward quantitative tightening, according to one-third of economists surveyed by Bloomberg. On Tuesday, the yen lingered just shy of the psychologically important level of 160 against the greenback.
“Nailing down the details of a cut in bond buying probably won’t be a constraint for a July hike,” Ayako Fujita, chief Japan economist at JPMorgan Securities, wrote in response to the survey. “The cost of postponing the adjustment of excessive monetary easing is rising with the emergence of upside inflation risks.”
Meanwhile, the outlook for China’s exports is set to improve, buttressing growth in the world’s second-biggest economy even as consumer spending slows, according to a separate survey. The yuan is trading near its weakest against the dollar since November.
Extended Rally
In the US session, Nvidia climbed roughly 7% after a $430 billion rout. In late trading, FedEx Corp. — a barometer of economic growth — jumped about 15% on a bullish forecast. In other corporate news, Rivian Automotive Inc. surged as Volkswagen AG will invest $5 billion to form a joint venture with the electric-vehicle maker.
Investors are likely to keep piling into US stocks at the sign of any pullback as the Fed edges closer to reducing interest rates, according to Societe Generale SA, which anticipates the easing cycle will begin in early 2025.
Even after an about 15% rally year-to-date, strategists led by Manish Kabra expect the S&P 500 to “stay in buy-the-dip mode, with the next upleg coming closer to a Fed rate-cutting cycle.”
Nvidia’s recent selloff isn’t reflective of a worsening outlook for tech or the broader market, as other demand signals are positive, according to UBS.
“Nvidia’s correction shouldn’t be mistaken as a warning signal on either the structural investment case for AI or the broader equity outlook,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management.
Elsewhere, oil held a decline after an industry report signaled a small build in US crude inventories. Meanwhile, gold and copper both fell as traders awaited economic data later this week for clues on when the Fed will pivot to looser monetary policy. Bitcoin topped $62,000.
Key events this week:
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US new home sales, Wednesday
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China industrial profits, Thursday
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Eurozone economic confidence, consumer confidence, Thursday
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US durable goods, initial jobless claims, GDP, Thursday
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Nike releases earnings, Thursday
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Japan Tokyo CPI, unemployment, industrial production, Friday
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US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
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Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 8:33 a.m. Tokyo time
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Hang Seng futures fell 0.6%
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S&P/ASX 200 futures fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0710
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The Japanese yen was little changed at 159.65 per dollar
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The offshore yuan was little changed at 7.2885 per dollar
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The Australian dollar was little changed at $0.6645
Cryptocurrencies
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Bitcoin fell 0.3% to $61,713.68
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Ether fell 0.5% to $3,392.83
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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