December 10, 2022

Asian stocks mixed amid Fed warning, China hopes

Asian stocks mixed amid Fed warning, China hopes

  • Federal Reserve Chairman Waller underestimates the CPI as just a single number
  • Beijing offers property support, COVID steps
  • Biden will meet with Xi at the G20 meeting

SYDNEY (Reuters) – Asian stock markets were mixed on Monday as a major US central bank warned investors not to drift around a single inflation number, while Chinese stocks rose on signs of helping the hard-hit real estate sector.

The modest inflation failure in the US was enough to see two-year Treasury yields drop by 33 basis points for the week and the dollar lost nearly 4%, the fourth-largest weekly decline since the era of free-floating exchange rates began more than 50 years ago.

However, the resulting easing in US financial conditions was not entirely welcomed by the Federal Reserve, with Governor Christopher Waller saying it would take a series of soft reports for the bank to undo the brakes. Read more

Waller added that markets were way ahead of themselves on just one inflation reading, although he conceded that the Fed could now begin to consider raising rates at a slower pace.

Futures are betting heavily on a half point rate rise to 4.25-4.5% in December and then quarter point moves to a peak in the 4.75-5.0% range.

Two-year bond yields rose to 4.41%, after diving as deep as 4.29% on Friday.

Bruce Kasman, head of economic research at JPMorgan, said, “The downside surprise for the CPI aligns with a broad range of indicators pointing to a shift in global inflation that would encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere. other”.

“This positive message should be tempered by acknowledging that the downward regression in inflation will be too small for central banks to declare their mission accomplished, and more tightening is likely on the way.”

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It added 0.8% after jumping 7.7% last week.

Japan’s Nikkei Index (.N225) It fell 0.6%, while South Korea fell (.KS11) flat gold. S&P 500 futures were down 0.3% and Nasdaq futures lost 0.4%.

EUROSTOXX 50 futures are up 0.4%, while FTSE futures are up 0.1%.

eyes on china

Traders were also waiting to see if Chinese stocks could extend their massive rally amid reports that regulators have asked financial institutions to provide more support for stressed property developers. Read more

China real estate index (CSI000952). 5% response jumped. blue chips (.CSI300) It rose 1.4% supported by a series of changes to COVID restrictions in China, even as more cases were reported over the weekend. Read more

“It is hard to see how the case news is not negative from an economic point of view, but the symbolism of the movement, however small, in the zero COVID strategy is what delights the markets with,” said Ray Atrell, Head of FX Strategy. in NAB.

US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns about Taiwan, the Russian war in Ukraine and North Korea’s nuclear ambitions high on his agenda. Read more

News about COVID rules led to the yuan rebounding in short-covering last week, adding to broad pressure on the dollar as yields plummet. The dollar regained strength a bit early on Monday as its index added 0.4% to 106,870, but remained far from last week’s high of 111.280.

The euro slipped slightly to $1.0324 after jumping 3.9% last week, while the dollar settled to 139.27 yen after falling 5.4% last week.

The dollar lost nearly as much against the Swiss franc, spurred in part by warnings from the Swiss National Bank that it would use interest rates and currency purchases to tame inflation. Read more

Sterling slipped back to $1.1790 ahead of the British chancellor’s autumn statement on Thursday as it is expected to outline tax increases and spending cuts. Read more

Cryptocurrencies remained under pressure as at least $1 billion in client funds was reported to have disappeared from collapsed cryptocurrency exchange FTX. Read more

Bitcoin is trading down 1.5% at $16,055, after dropping nearly 22% last week.

The dollar’s recent pullback has provided a much-needed boost to commodities, as gold settled at $1,763 an ounce after jumping more than $100 last week.

Oil futures extended gains on hopes of a recovery in Chinese demand, with Brent crude rising 63 cents to $96.62, while US crude rose 56 cents to $89.52 a barrel.

Reporting from Wayne Cole. Edited by Shree Navaratnam

Our criteria: Thomson Reuters Trust Principles.