Asia stocks, Europe futures edge higher before CPI: markets wrap

Asian equities rose with European and US stocks futures Thursday as traders wagered that inflation is cooling in the world’s largest economy.

An index of the region’s stocks climbed for a ninth time in 10 days as it headed for the highest level in about five months. A drop in Hong Kong-listed technology companies pulled the gauge down from its earlier high.

The yen rallied on a report that the Bank of Japan would look into the side effects of its ultra-loose monetary policy. Japanese government bond futures slid to the lowest since 2014 and the yield on the nation’s benchmark 10-year debt sat hard against the BOJ’s 0.5% ceiling.

Treasuries made a small extension to gains from the US session and a gauge of dollar strength declined slightly as investors looked beyond the drumbeat of hawkish comments from Federal Reserve officials.

Traders also appeared to be downplaying a potentially miserable stretch of earnings and the specter of a recession as they focus on the US consumer price index report due later Thursday.

“Continued rerating triggered by improved sentiment is carrying markets higher,” said Lorraine Tan, equity research director at Morningstar Asia. “Inflation pressure is easing and interest rates should be peaking within the next six months.”

Every aspect of CPI will be scrutinized, with extra attention on core inflation, which excludes food and energy and is seen as a better indicator than the headline measure. The projected 5.7% increase would be well above the Fed’s goal, helping explain its intention of keeping rates higher for longer. But the year-over-year price growth would also show moderation.

Futures for the Nasdaq 100 inched up after the technology sector, one of the most-beaten down groups during the Fed’s tightening campaign, led gains among US shares on Wednesday. Contracts for the S&P 500 also made modest gains while those for the Euro Stoxx 50 rose about 0.5%

“The last two months have shown that big swings in US CPI can spark significant volatility in the equity markets, given the large amounts of hedging flows and short-term options covering,” Saxo Capital Markets strategists including Charu Chanana wrote in a note. “With a big focus on CPI numbers again this week, similar volatility cannot be ruled out.”

Inflation data for China showed factory-gate prices falling more than expected in December and consumer prices ticking up as the end of Covid Zero snarled manufacturing operations but eliminated mobility curbs on people. The offshore yuan fluctuated while remaining near Wednesday’s closing level.

While Chinese assets have been top performers globally in recent months, many large foreign investors are wary of trusting the government given the regulatory shocks of 2022.

Elsewhere in markets, oil steadied after five days of gains ahead of the US inflation figures and as China’s crude buying ramps up before the Lunar New Year holidays.

Gold climbed ahead of the data, which may determine whether its two-month uptrend continues.

Key events this week:

• US CPI, initial jobless claims, Thursday
• St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
• Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
• China trade, Friday
• US University of Michigan consumer sentiment, Friday
• Citigroup, JPMorgan, Wells Fargo report earnings, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 2:57 p.m. Tokyo time. The S&P 500 rose 1.3%
• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 1.8%
• Japan’s Topix rose 0.4%
• Australia’s S&P/ASX 200 rose 1.2%
• The Shanghai Composite rose 0.1%
• Euro Stoxx 50 futures rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.0763
• The Japanese yen rose 0.6% to 131.62 per dollar
• The offshore yuan was little changed at 6.7650 per dollar
• The British pound was little changed at $1.2157

Cryptocurrencies

• Bitcoin rose 3% to $18,083.2
• Ether rose 3.9% to $1,394.95

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.53%
• Japan’s 10-year yield was unchanged at 0.50%
• Australia’s 10-year yield declined 12 basis points to 3.60%

Commodities

• West Texas Intermediate crude rose 0.1% to $77.49 a barrel
• Spot gold rose 0.4% to $1 883.81 an ounce