Stocks eke out gains, dollar eases before CPI data: markets wrap
Stocks climbed while the dollar edged down amid cautious trading ahead of US inflation data that may shape the outlook for interest-rate hikes into next year.
Hong Kong scrapping its three-day Covid monitoring period for arriving travellers bolstered sentiment during Asian trading, sending shares in the city higher. US futures remained slightly lower.
The dollar saw marginal declines against most of its major counterparts. Treasury yields inched lower after gains on Monday that sent the 10-year rate to above 3.6%. Yields for Australian and New Zealand government bonds ticked higher.
Investors will be closely watching the consumer price figures, which are expected to remain elevated even as the rate of increase slows. A subdued CPI print would justify the Federal Reserve’s projected half-point move on Wednesday and shed light on whether markets can expect rate cuts in late 2023.
The release of the inflation data will be more critical than the Fed’s decision, according to Xi Qiao, managing director for global wealth management at UBS Group AG. “It’s all going to depend on CPI numbers, whether the Fed is going to pivot or not,” she said on Bloomberg Television. “With the current inflation situation, a lot of the fundamental challenges that we have right now are going to go into 2023.”
Other central banks are also set to announce their final rate decisions of the year this week. The European Central Bank will announce its rate decision on Thursday, and may also opt for a half-point hike. Markets will also contend with decisions from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.
A potential fillip for markets is oil trading around the lowest price this year after prices plunged 11% last week. After gaining 3% on Monday, West Texas Intermediate edged higher to remain above $73 a barrel on Tuesday.
Still, investors will continue to monitor for market risks from Covid infections in China. They are also weighing the impact of Japan and the Netherlands agreeing in principle to at least partially join the US in increasing controls over the export to China of advanced machinery to make semiconductors. Trading of Asian semiconductor stocks was mixed on the news. BM/DM