Stocks advance as traders assess Fed rate path: markets wrap

Asian stocks rose following their worst sell-off in two weeks after US equities rebounded as investors weighed the prospect of large interest rate hikes by the Federal Reserve. The dollar edged higher.

European futures were mixed as benchmarks in Japan and Australia climbed. Shares advanced in Hong Kong amid a rally in Chinese developers after reports of increased efforts by officials to arrest a housing slump. US contracts fluctuated after the S&P 500 closed in the green thanks to dip buyers late in the session.

Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.

“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”

Swaps traders are pricing in a hike of three-quarters of a percentage point when the Fed meets next week, with some wagers appearing for a full-point move. The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.

While the magnitude of the stock rout was impressive following hot US inflation data, the S&P 500 only reversed most of the gains made in the previous four sessions. The lack of a surge in the VIX index — known as the “fear gauge” — suggests that the selloff was a recalibration of those expectations rather than panic selling.

Asian currencies remained at risk from a strong greenback. The yen weakened on Thursday to trade around 143.5 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.

The offshore yuan was close to the 7 level versus the dollar after the central bank drained liquidity from the banking system for a second straight month while leaving rates unchanged as it sought to ease pressure on the currency.

Crude oil fluctuated amid optimism for demand with China easing Covid restrictions in the megacity of Chengdu. Natural gas futures surged the most among major US-traded commodities as hot weather forecasts and a looming rail strike added to concern about tight supplies ahead of winter.

Here are some key events to watch this week:

• US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
• China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
• Euro area CPI, Friday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures contracts were little changed as of 6:44 a.m. in London. The underlying gauge rose 0.3% on Wednesday
• Nasdaq 100 futures fluctuated after a gain of 0.8% for the index
• Euro Stoxx 50 futures were little changed
• Australia’s S&P/ASX 200 rose 0.3%
• Japan’s Topix gained 0.1%
• Hang Seng Index rose 0.2%
• Shanghai Composite Index fell 1.4%
• Kospi index slipped 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%. It fell 0.2% on Wednesday
• The euro fell 0.2% to $0.9961
• The yen dropped 0.4% to 143.62 per dollar
• The offshore yuan traded at 6.9790 versus the dollar

Bonds

• The yield on 10-year Treasuries rose three basis points to 3.43%
• The yield on 10-year Australian debt gained four basis points to 3.68%

Commodities

• West Texas Intermediate crude traded at $88.64 a barrel
• Gold was fell 0.5% to $1 688.94 an ounce