Asian stocks edge higher ahead of Lunar New Year: markets wrap

Hong Kong equities led gains and shares in Japan reversed small initial losses. Futures for US stocks rose after the selloff on Wall Street showed some signs of easing on Thursday, when the S&P 500 fell for a third day.

Commodities and Asian equities have shrugged off some of the bearish news this week out of the US as traders bet on China’s economic revival. JPMorgan Chase & Co raised its estimate for the nation’s oil demand growth and said it’s reopening sooner and more rapidly than the bank originally expected.

Treasuries were little changed in Asia after staying lower throughout the US session, mirroring moves in German bunds after the head of the European Central Bank reaffirmed her aggressive stance. 

Japan’s benchmark 10-year bond yield was at 0.405% versus the central bank’s 0.5% ceiling. Australian 10-year yields were up eight basis points. 

The yen weakened slightly after consumer price data – which was in line with estimates – showed inflation at 4% for the first time in more than four decades. 

Traders are also focused on the path ahead of the Federal Reserve. Vice chair Lael Brainard, considered a dove, said on Thursday rates would need to stay elevated for a period to further cool inflation. She didn’t state a preference for whether the Fed should downshift hikes at its next meeting or what peak rate she envisioned this year. 

Her comments came a day after Fed hawks called for boosting rates, with St Louis Fed president James Bullard pencilling in a forecast for a rate range of 5.25% to 5.5% by the end of this year. The current range is 4.25% to 4.5%. 

Adding to the sombre mood in the US, the federal debt limit was hit and the Treasury Department began the use of special measures to avoid defaulting on any payments.

Data were mixed, with new US home construction declining for a fourth-straight month in December. Applications for US unemployment benefits unexpectedly fell last week, sliding to the lowest level since September and underscoring a strong jobs market. That followed figures a day earlier showing producer prices and retail sales fell, while business equipment production slumped.  BM/DM