Asia stocks, US futures fall after CPI; dollar up: markets wrap

Asian stocks and US equity futures dropped as investors weighed hot American inflation data and mixed commentary from central bankers on the outlook for interest rates.

An Asian equity benchmark was headed for the lowest close in more than a month as South Korea and Hong Kong stocks led regional declines. The Hang Seng China Enterprises Index slid, pushing the gauge 10% below its January peak.

Contracts for the S&P 500 retreated after the index ended Tuesday little changed. Nasdaq 100 futures also slid after the gauge, which is more sensitive to higher interest rates, rose 0.7% on Tuesday.

The two-year Treasury yield remained near the highest level since November after adding 10 basis points Tuesday. The 10-year Treasury benchmark was broadly flat after falling four basis points in the prior session. Australian and New Zealand benchmark yields were largely unchanged.

The moves were driven by US CPI data that showed prices rose more than forecast, and subsequent comments from policy makers.

Federal Reserve Bank of Philadelphia President Patrick Harker said the Fed was nearing the point where rates were restrictive enough. “In my view, we are not done yet,” he said. “But we are likely close.”

Harker’s Richmond Fed counterpart Thomas Barkin told Bloomberg TV that the central bank might “have to do more”to fight inflation and Dallas Fed President Lorie Logan said rate increases could last “for a longer period than previously anticipated.”

“Inflation is still falling, but it’s not falling as quickly as we hoped,” Benjamin Kirby, co-head of investments for Thornburg Investment Management, said in an interview with Bloomberg Television. “The overall narrative is pretty much intact,” he added. “The Fed is nearing its terminal rate.”

The dollar edged higher against all of its Group-of-10 peers, while the yen steadied after weakening over the prior two days. Oil fell for a second day after after an industry estimate pointed to a large build in US inventories and investors assessed the outlook for US monetary policy. Gold slipped.

Elsewhere, the People’s Bank of China added more cash into the financial system to meet a rebound in loan demand after the nation eased Covid restrictions.

Key events:

• US retail sales, UK CPI Wednesday
• US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
• France CPI, Russia GDP Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 2:11 p.m. Tokyo time. The S&P 500 was little changed
• Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 0.7%
• Japan’s Topix index fell 0.3%
• South Korea’s Kospi index fell 1.4%
• Hong Kong’s Hang Seng Index fell 1.2%
• China’s Shanghai Composite fell 0.3%
• Australia’s S&P/ASX 200 Index fell 1.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.2% to $1.0719
• The Japanese yen was little changed at 133.03 per dollar
• The offshore yuan fell 0.2% to 6.8508 per dollar

Cryptocurrencies

• Bitcoin fell 0.6% to $22,112.96
• Ether fell 0.3% to $1,551.03

Bonds

• The yield on 10-year Treasuries was little changed at 3.74%
• Australia’s 10-year yield advanced one basis point to 3.75%

Commodities

• West Texas Intermediate crude fell 1% to $78.30 a barrel
• Spot gold fell 0.4% to $1 846.31 an ounce