Asia Stocks Face Mixed Open After US Shares Rally: Markets Wrap
(Bloomberg) — Stocks in Asia are primed for a mixed open Wednesday following a late rally in US shares in a volatile session after Federal Reserve Chair Jerome Powell rebuffed an opportunity to tamp down investor optimism.
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Equity futures in Australia and Japan edged higher while those in Hong Kong fell. The S&P 500 rose more than 1%, reversing losses of as much as 0.6%. The tech-heavy Nasdaq 100 outperformed major benchmarks, climbing more than 2%.
Australian bonds dropped in early trading following declines in Treasuries on Tuesday that pushed the benchmark 10-year yield three basis points higher to 3.67%. The yen steadied after rallying more than 1% Tuesday, while the Aussie weakened slightly after also gaining more than 1% following the Reserve Bank of Australia’s decision to increase interest rates Tuesday.
Powell’s sober comments echoed those made after last week’s FOMC meeting, soothing traders who were expecting the Fed chief to push back the loosening of financial conditions and Friday’s bumper jobs report. Powell highlighted that disinflation has begun, further hikes will likely be needed if the jobs market remains strong.
In separate comments Fed Bank of Minneapolis President Neel Kashkari said the Fed would likely have to raise interest rates to 5.4% at the top of its target range given the strength in the US jobs market. The Fed increased rates 25 basis points last week to a band of 4.5% to 4.75%.
“The important takeaway is that Powell had a chance to signal a shift to a more aggressive posture and he didn’t take it,” wrote Bill Adams, chief economist for Comerica Bank in Dallas. “In the near-term, the Fed will likely continue to make one (or perhaps two) more hike(s) before going on hold.”
Read: Powell Says Further Rate Hikes Needed and Bonds Take Heed
Elsewhere in markets the oil price rose 4.1%, its biggest one-day move since November, helped along by a rebound in demand from China.
Traders will also keep a close eye on Joe Biden’s speech to a joint session of Congress on Tuesday evening in light of renewed tensions with China and a brewing showdown with House Republicans over raising the federal debt ceiling.
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Key events:
US wholesale inventories, Wednesday
New York Fed President John Williams is interviewed at Wall Street Journal live event, Wednesday
US initial jobless claims, Thursday
ECB President Christine Lagarde participates in EU leaders summit, Thursday
Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday
US University of Michigan consumer sentiment, Friday
Fed’s Christopher Waller and Patrick Harker speak, Friday
Some of the main moves in markets as of 7:50 a.m. Tokyo time:
Stocks
Nikkei 225 futures rose 0.1%
Hang Seng futures fell 0.9%
S&P/ASX 200 futures rose 0.5%
The S&P 500 rose 1.3%
The Nasdaq 100 rose 2.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.4% on Tuesday
The euro was little changed at $1.0725
The yen was little changed at 131.08 per dollar
The offshore yuan was little changed at 6.7826 per dollar
Cryptocurrencies
Bitcoin rose 0.3% to $23,264.91
Ether was little changed at $1,668.28
Bonds
The yield on 10-year Treasuries advanced three basis points to 3.67%
Australia’s 10-year yield advanced six basis points to 3.66%
Commodities
Spot gold was unchanged at $1,873.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
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