Asian stocks weaken as traders brace for inflation data – Portal

Pedestrians walk past an electronic board displaying the Nikkei stock average outside a stock brokerage in Tokyo

Pedestrians walk past an electronic board displaying the Nikkei stock average in front of a brokerage firm in Tokyo, Japan, October 31, 2023. Portal/Kim Kyung-Hoon ACQUIRES LICENSE RIGHTS

SINGAPORE, Nov 28 (Portal) – Asian shares rose on Tuesday while the dollar hovered near its three-month low, as investors remained confident the Federal Reserve had completed its cycle of interest rate hikes and ahead of a key inflation report later this year Waited a week.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.29% and is expected to gain nearly 7% in November, its strongest monthly performance since January.

But European stock markets faced a lackluster opening, with Eurostoxx 50 futures down 0.11%, German DAX futures down 0.18% and FTSE futures down 0.09%. US stock futures were little changed.

Investors this week will focus on the Fed’s preferred inflation indicator and euro zone consumer inflation numbers on Thursday to gain more clarity on the direction prices and monetary policy are heading.

If data shows inflation cooling further, markets will be more comfortable with expectations that the Fed will pause, said Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore.

“But I think it’s not just this week’s inflation indicator, but also the December payroll numbers… they’re going to be pretty critical.”

Markets are pricing in a 95% chance that the Federal Reserve will leave interest rates unchanged next month, with the possibility of a rate cut starting in mid-2024 gaining traction, according to CME’s FedWatch tool.

“We expect that the Fed will likely begin cutting interest rates if inflation falls below 3 percent. And we expect this to happen sometime in the middle of next year,” Menon said.

But officials at major central banks have tried to contain expectations of looming interest rate cuts by pointing out that rates will need to stay higher for some time to combat inflation.

“We think monetary policy is likely to need to be tight for an extended period,” Dave Ramsden, deputy governor of the Bank of England, told a conference in Hong Kong.

On Monday, European Central Bank President Christine Lagarde said the central bank’s fight to contain price growth was not over, citing still-strong wage growth and an uncertain outlook even as inflation pressures ease in the euro zone.

Fed Chairman Jerome Powell will also speak on Friday, and his words will be closely scrutinized by traders as they gauge where interest rates could head.

China’s blue-chip CSI 300 index (.CSI300) fell 0.17%, while Hong Kong’s Hang Seng index (.HSI) fell 1%, a day after data showed that Chinese industrial companies’ earnings fell in the October grew more slowly.

Japan’s Nikkei (.N225) fell 0.12% but is up 8% this month, on track for its strongest monthly performance in three years.

U.S. data on Monday showed new single-family home sales fell more than expected in October as higher mortgage rates reduced affordability, but the residential real estate segment continued to be supported by a continued shortage of existing homes on the market.

The weaker-than-expected data weighed on Treasury yields, with the benchmark 10-year note yield falling 9.6 basis points on Monday. In Asian hours, they rose 0.8 basis points to 4.396%.

The dollar index, a measure of the dollar against a basket of currencies, fell to 103.07, the lowest since August 31. The index is down 3%, on track for its biggest monthly decline in a year.

The Japanese yen gained 0.27% to 148.27 per dollar, while the euro fell 0.05% to $1.0948.

The Australian dollar rose 0.19% to $0.6619, after earlier climbing to a four-month high of $0.6632. The New Zealand dollar hit a seven-week high of $0.6114 earlier in the session and was last trading at $0.60985.

Data showed Australian retail sales fell unexpectedly in October as consumers cut back on everything but groceries. However, analysts believe many were simply saving some money to treat themselves to the Black Friday sales that took place this month.

U.S. crude fell 0.13% to $74.76 a barrel and Brent was back below $80, with oil prices swinging between gains and losses ahead of the OPEC+ meeting later this week.

Spot gold rose 0.1% to $2,015.00 an ounce, after hitting a fresh six-month high of 2,017.89 earlier in the session.

Reporting by Ankur Banerjee; Editing by Sam Holmes and Kim Coghill

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