(Bloomberg) — European stocks are set to follow their US peers higher following a choppy Asian session as markets awaited further trading catalysts. The Australian dollar strengthened on faster-than-expected inflation data.
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Japanese and Hong Kong equity gauges rose, while those in Australia declined. US stock futures ticked higher in Asia after a rebound in Nvidia Corp. shares helped boost the S&P 500 on Tuesday.
Australia’s dollar and bond yields climbed after the inflation numbers suggested price pressures remain stubbornly strong and bolstered the case for the central bank to resume raising interest rates. The yen held just below the psychologically important level of 160 per dollar, a breach of which will likely boost intervention concern.
“There’s limited event risk for the broader region today,” said Kyle Rodda, a market analyst at Capital.com. “However, the yen remains within touching distance of 160 and levels that Japanese authorities intervened in the market.”
China’s 10-year bond yield fell to a more than two-decade low as investors flocked to fixed-income securities amid concern about the slowing economy and expectations for further stimulus.
In Australia, the monthly consumer price indicator climbed 4% from a year earlier, exceeding economists’ estimate of 3.8%, government data showed Wednesday. The trimmed mean core measure, which smooths out volatile items, advanced to 4.4% versus 4.1% a month earlier.
“Without much doubt, today’s CPI, now the highest among all the major economies, is a bombshell for the RBA,” said Hebe Chen, an analyst at IG Markets Ltd. “The much-discussed question of whether the RBA was moving behind the curve now seems to have a positive answer, another underlying concern that will keep AUD higher or longer.”
China’s central bank once again loosened its grip on the yuan as the currency traded close to the weak end of its fixed daily trading band. 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 survey by Bloomberg.
Investor expectations for the European Central Bank to loosen monetary policy twice more this year — and bring borrowing costs to as low as 2.25% in 2025 — are fair, according to Governing Council member Olli Rehn. The Finnish central-bank chief also said that officials shouldn’t overly dampen economic activity.
HSBC Holdings Plc lifted its view on South Korean stocks to overweight from neutral, citing “ample growth opportunities in the memory sector and excitement around the ‘Value-Up’ program.”
Extended Rally
In US trading hours Tuesday, a report showed consumer confidence slowed amid 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.
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 early next year.
In commodities, oil held a decline after an industry report signaled a small build in US crude inventories ahead of official government data. Copper fell to the lowest in more than two months with prices facing sustained pressure from unusually weak Chinese demand. Gold was little changed.
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 6:44 a.m. London time
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Japan’s Topix rose 0.4%
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Australia’s S&P/ASX 200 fell 0.8%
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Hong Kong’s Hang Seng rose 0.1%
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The Shanghai Composite was little changed
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Euro Stoxx 50 futures rose 0.6%
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Nasdaq 100 futures rose 0.2%
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Australia’s S&P/ASX 200 fell 0.8%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0706
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The Japanese yen was little changed at 159.79 per dollar
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The offshore yuan was little changed at 7.2926 per dollar
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The Australian dollar rose 0.6% to $0.6686
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The British pound was little changed at $1.2688
Cryptocurrencies
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Bitcoin fell 0.5% to $61,602.76
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Ether fell 0.7% to $3,386
Bonds
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The yield on 10-year Treasuries advanced one basis point to 4.26%
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Japan’s 10-year yield advanced two basis points to 1.015%
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Australia’s 10-year yield advanced 11 basis points to 4.31%
Commodities
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West Texas Intermediate crude rose 0.6% to $81.29 a barrel
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Spot gold fell 0.2% to $2,314.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck.
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