(Bloomberg) — Stocks in Asia fell back as investors positioned for an action-packed week, including the release of U.S. consumer price data that may confirm the battle against inflation is not over, frustratingly hopes of a Federal Reserve rate reversal.
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Negative sentiment reverberated across major Asian indices, with a regional equity benchmark heading for its lowest close in more than a month. Futures contracts on US stocks fell. The S&P 500 closed last week down 1.1%, while the tech-heavy Nasdaq 100 fell 2.1%, the worst weekly performance this year for the two indices. Bonds also fell, with the Bloomberg Global Aggregate Index falling 1.6%, the worst weekly performance since September.
Yields on Australian and New Zealand government bonds rose following a selloff of US government debt on Friday that lifted the 10-year Treasury yield by seven basis points. Treasuries were range bound on Monday and the dollar strengthened against all currencies in the Group of 10 basket.
The yen weakened past 132 to the dollar after jarring on Friday following news reports that Kazuo Ueda would be chosen to become the next Bank of Japan governor. Investors initially interpreted the decision as a potentially aggressive option. Those gains fell after Ueda spoke to reporters and said the BOJ stimulus should stick. The government of Japan is set to officially announce the nomination of the new BOJ governor on Tuesday.
At the moment, Ueda seems to be more aggressive than the current moderate governor Haruhiko Kuroda, according to Yujiro Goto, head of FX strategy at Nomura Holdings Inc. “The BOJ’s policy stance will be at least more neutral going forward and the is also signaling that the normalization of monetary policy is necessary,” he said on Bloomberg Television. “That will continue to be positive for the Japanese yen over the medium term.”
Investors are reassessing how much US interest rates will rise this year, and inflation and employment data are likely to remain hot later this week. That has fueled bets for the Fed rate to peak at 5.2% in July, up from less than 5% a month ago.
“The next CPI report has gone binary: markets will heave a big sigh of relief or risk aversion will accelerate,” said Eric Robertsen, global head of research and chief strategist at Standard Chartered Plc. “The more the FOMC is forced to extend the rate hike cycle and postpone rate cuts, the more likely it is that the US will experience a hard landing, requiring more aggressive rate cuts later on.”
Read More: Fed’s Harker Favors Rates Above 5%, Says Soft Landing Odds Increased
Philadelphia Fed President Patrick Harker was the latest central banker to reveal expectations for rates to rise above 5% after a barrage of comments last week that included a prediction from the Minneapolis Fed president. , Neel Kashkari, that the level would reach 5.4%.
Singapore reported 2022 economic growth of 3.6% on Monday, compared with 3.8% seen previously. The city state reaffirmed its growth forecast for this year between 0.5% and 2.5%, as authorities focus on combating stubborn core inflation and slowing demand. The Singapore dollar fell.
Traders are also watching geopolitical developments after the Pentagon shot down an unidentified object it was tracking over Michigan, according to US officials familiar with the matter. This was the fourth time in eight days that a balloon or high-flying craft has been shot down over the US or Canada.
Elsewhere, oil fell as Russia’s plan to curb supplies in retaliation for Western sanctions was offset by concerns about slowing global growth. Lower gold border.
Key events:
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India CPI, Fed Governor Michelle Bowman speaks at the American Bankers Association on Monday
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US CPI, UK jobless claims, Eurozone GDP, New York Fed President John Williams gives keynote address at New York Bankers Association event on Tuesday
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Nomination of Japan’s new BOJ governor on Tuesday
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US Retail Sales, UK CPI on Wednesday
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US jobless claims, Australian jobless, Cleveland Fed President Loretta Mester speaks at the Center for Global Interdependence event on Thursday
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France CPI, Russia GDP Friday
Some of the major moves in the markets as of 2:39 pm Tokyo time:
Stocks
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S&P 500 futures fell 0.4%. The S&P 500 rose 0.2%
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Nasdaq 100 futures fell 0.4%. The Nasdaq 100 fell 0.6%
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Japan’s Topix Index fell 0.4%
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South Korea’s Kospi index fell 0.8%
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Hong Kong’s Hang Seng Index fell 0.3%
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China’s Shanghai Composite Index rose 0.6%
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Australia’s S&P/ASX 200 Index fell 0.2%
coins
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.1% to $1.0664
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The Japanese yen fell 0.6% to 132.16 per dollar
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The offshore yuan fell 0.3% to 6.8407 per dollar
CRYPTOCURRENCIES
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Bitcoin rose 0.5% to $21,848.24
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Ether rose 0.5% to $1,519.3
Captivity
raw Materials
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West Texas Intermediate crude fell 1.1% to $78.81 a barrel
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Spot gold fell 0.4% to $1,858.85 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With the assistance of Richard Henderson and Youkyung Lee.
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