Japan stocks lift dour Asian session; dollar firm: markets wrap
The Asian stock market session was otherwise cautious on Friday while Treasuries were steady as investors assessed how far the Federal Reserve must jack up interest rates to ensure high inflation keeps cooling.
An Asia-Pacific share gauge rose less than 0.5%, propped up by a catch-up rally in Japan following a holiday there. China and Hong Kong struggled to make progress. US futures fluctuated after the S&P 500 and Nasdaq 100 dipped.
Shorter maturity Treasury yields were little changed. The 30-year note paired a Thursday drop sparked by middling demand at an auction. The dollar edged up.
In the latest US central banker comments, San Francisco Fed president Mary Daly said inflation is too high, adding she anticipates more restrictive monetary policy in 2023. She said her baseline is a half-point September hike but that she’s open to 75 basis points if necessary.
She was speaking on Bloomberg Television in the wake of a report showing that US producer prices fell in July from a month earlier for the first time in over two years, adding to signs of cooling but still troubling inflation.
Stocks this week have cheered the possibility that ebbing price pressures will take the pressure off the Fed to keep hiking rates sharply, making a soft economic landing more likely. Global shares are set for the longest streak of weekly gains since 2021, paring their retreat this year to about 14%.
The bond market seems more sceptical – an ongoing Treasury yield curve inversion hints at concerns that only a recession can curb the cost of living.
“There are going to be headwinds for the markets until we get some resolution on how far the Fed is going to go and how long they’re going to raise interest rates,” Terri Jacobsen, a managing director in wealth management at UBS Financial Services, said on Bloomberg Television.
Swaps referencing the Fed’s September meeting point to some uncertainty over whether a half-point or another 75 basis-point rate hike is on the cards.
Raw material prices are adding to the complexity. Oil headed for a weekly gain that’s contributed to a more than 10% rebound in a commodity index from a July low – a trend that could darken the inflation picture if it continues.
Elsewhere, Bitcoin slipped below $24,000 and gold inched lower. BM