Stocks in Asia ticked lower on Wednesday as investors waited to hear more from Federal Reserve officials who are due to speak this week, including Chair Jerome Powell.
A gauge of the region’s equities fell, as Japan’s Topix led declines. Japanese banks extended their drop on falling yields that tempered expectation of higher profitability. Chinese benchmarks fluctuated between gains and losses.
Treasuries steadied in Asian trading after bets on a Fed pivot next year sent bond rates sharply down Tuesday. The 10-year yield fell below 4.6% as traders dismissed hawkish comments from the Fed. US equity futures were also little changed.
“Investors are cautiously perched on the edge before the reality-checking moment,” said Hebe Chen, analyst at IG Markets Ltd. “Both Fed Chair Powell’s speech today and China’s inflation data tomorrow hold significant potential to scrutinize, and possibly even reverse, the recent upsurge in optimism.”
Traders are awaiting comments from US policymakers this week, including Powell and New York Fed President John Williams, to see how hard the central bank will push back against the recent loosening of financial conditions.
Oil extended losses after tumbling to a three-month low as a forecast drop in US gasoline consumption added to a growing array of indicators suggesting the demand outlook is worsening. China, the world’s biggest importer, is also seeing dimming oil demand as winter approaches.
“A drop in oil prices is due to concerns about a stagnant demand against a backdrop of uncertainty about the global economy,” said Rina Oshimo, senior strategist at Okasan Securities. “There’s a noticeable decline mainly in economically sensitive stocks such as trading companies, steel, and marine transportation.”
Global equities are poised for a double-digit rally in 2024 if the Fed pivots its monetary policy and allows the economy to avoid a recession, according to HSBC Holdings Plc strategists.
Chinese equities whipsawed after falling yesterday on the nation’s trade data Tuesday. Beaten-down Chinese equities may have an opportunity for gains with the possible upcoming meeting between leaders of the US and China next week, according to the chief investment officer of Templeton Global Equity Investments.
Dollar bonds for two Chinese investment-grade developers continued to rally Wednesday after the country’s central bank and regulators discussed with some builders their financing needs and liquidity.
Elsewhere, the bond market is betting on a “dovish pivot” for the seventh time since the Federal Reserve and other central banks embarked on a tightening cycle, raising the prospect of another false dawn, according to Deutsche Bank macro strategist Henry Allen. Australia’s 10-year yield declined after the central bank signaled a higher hurdle to further policy tightening on Tuesday.
Fed Bank of Minneapolis President Neel Kashkari said policymakers have yet to win the fight against inflation and they will consider more tightening if needed. His Chicago counterpart Austan Goolsbee said officials don’t want to “pre-commit” decisions on rates.
Several of the US central bank’s more hawkish policymakers signaled that the cumulative tightening of financial conditions since July — with yields on 10-year Treasury bonds up more than 100 basis points — could have a dampening effect on the economy, though they want more time to see if it will last. Fed Governor Christopher Waller called the runup in yields an “earthquake” for the bond market.
The US dollar steadied after strengthening in its last session. Gold was also little changed after dropping to a two-week low.
Key events this week:
- Eurozone retail sales, Wednesday
- Germany CPI, Wednesday
- BOE Governor Andrew Bailey speaks, Wednesday
- New York Fed President John Williams speaks, Wednesday
- Bank of Japan issues October summary of opinions, Thursday
- BOE chief economist Huw Pill speaks on the economy, Thursday
- US initial jobless claims, Thursday
- Fed Chair Jerome Powell participates in panel on monetary policy challenges, Thursday
- Atlanta Fed President Raphael Bostic and his Richmond counterpart Tom Barkin speak, Thursday
- ECB President Christine Lagarde participates in fireside chat, Friday
- US University of Michigan consumer sentiment, Friday
- Dallas Fed President Lorie Logan and her Atlanta counterpart Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 1:20 p.m. Tokyo time. The S&P 500 rose 0.3%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 rose 0.9%
- Japan’s Topix fell 1.2%
- Australia’s S&P/ASX 200 was little changed
- Hong Kong’s Hang Seng was little changed
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0689
- The Japanese yen was little changed at 150.48 per dollar
- The offshore yuan was little changed at 7.2766 per dollar
- The Australian dollar was little changed at $0.6435
Cryptocurrencies
- Bitcoin fell 0.6% to $35,282.61
- Ether fell 0.6% to $1,882.05
Bonds
- The yield on 10-year Treasuries advanced one basis point to 4.58%
- Australia’s 10-year yield declined 10 basis points to 4.60%
Commodities
- West Texas Intermediate crude fell 0.3% to $77.11 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Sharon Cho.
