Stocks mixed with China, Adani and Fed in limelight: markets wrap

The Shanghai Shenzhen CSI 300 Index surged around 1%, putting it on course to close more than 20% above its October low and in a bull market as onshore exchanges reopened from the week-long Lunar New Year holiday.  

Japanese and Australian equities swung between gains and losses while benchmark indexes in Hong Kong and Seoul were decisively lower.

This contrasts with more clear-cut optimism in bets that the Federal Reserve will slow the pace of rate hikes later this week, and to the advance on Wall Street on Friday that saw traders brush off disappointing outlooks from some of the world’s largest technology companies to push the Nasdaq 100 up 1%. 

The broader outlook for the Fed is keeping downward pressure on the dollar, which has helped Asian markets outperform the US this year. China’s pivot away from Covid Zero policies is also boosting the region, with indications over the last week that infections don’t appear to have gotten out of control during the festive season, while consumption statistics have supported wagers for economic recovery.

Later in the Asian day attention will move to India, where the Adani Group has been under intense pressure, losing more than $50-billion in market value in two sessions. It published a 413-page rebuttal of allegations of fraud by short seller Hindenburg Research in an effort to calm potential investors before a $2.5-billion share sale.

Midweek central banks will dominate the agenda, beginning on Wednesday with the Fed, which is expected to downshift to a 0.25% increase in interest rates amid signs of cooling inflation. 

A report on Friday showed the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment.

“We look at the data flow and see a market that senses a positive outcome for risk assets and where pullbacks should be shallow,” Chris Weston, head of research at Pepperstone Group, wrote in a note. He also cautioned that this is “one of the biggest weeks of absolute tier 1 event risk in recent memory”, and added that the rise in commodities prices is concerning. 

Treasury Secretary Janet Yellen said last week she’s encouraged by recent data on inflation and jobs, but conceded the economy is at risk of recession.

The European Central Bank and the Bank of England are each projected to hike by a half basis point when they deliver decisions a day after the Fed. 

The nascent year’s tech resurgence gave the Nasdaq 100 its best week since November – with Tesla and Facebook parent Meta Platforms climbing at least 3% on Friday. The gauge also notched its fourth straight weekly advance. That’s even after a bleak forecast from Intel that followed recent worrisome remarks from Microsoft and Texas Instruments.

Elsewhere in markets, a gauge of dollar strength was little changed on Monday and G10 currencies traded in relatively narrow ranges. The onshore yuan rallied in a catchup move.

Benchmark 10-year Treasury yields rose about one basis point. Rates on government bonds in Australia had similar moves. 

Meanwhile, hedge funds are betting this year’s stellar start for Treasuries is too good to last, quietly building up the biggest bearish bet on bond futures on record.

An aggregate measure of net-short non-commercial positions across all Treasuries maturities has hit 2.4 million contracts, according to the latest data from the Commodity Futures Trading Commission as of 24 January.

Oil fluctuated and gold slid after eking out a sixth weekly gain.

Key events this week:

• International Monetary Fund’s world economic outlook, Monday
• China industrial profits, PMIs, Tuesday
• Eurozone GDP, Tuesday
• US Conference Board consumer confidence, Tuesday
• Earnings Tuesday include: UBS, Unicredit, Snap and Advanced Micro Devices
• Eurozone Manufacturing PMI, CPI, unemployment, Wednesday
• US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
• FOMC rate decision, Fed chair Jerome Powell press conference, Wednesday
• Earnings Wednesday include: Meta Platforms and Peloton Interactive
• Eurozone ECB rate decision, president Christine Lagarde press conference, Thursday
• UK BOE rate decision, Thursday
• US factory orders, initial jobless claims, US durable goods, Thursday
• Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander
• Eurozone S&P Global Eurozone Services PMI, PPI, Friday
• US unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 12.19pm Tokyo time.
• Nasdaq 100 futures fell 0.4%
• Japan’s Topix rose 0.1%
• Australia’s S&P/ASX 200 was little changed
• Hong Kong’s Hang Seng fell 1.3%
• The Shanghai Composite rose 0.6%
• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0867
• The Japanese yen fell 0.2% to 130.13 per dollar
• The offshore yuan was little changed at 6.7549 per dollar
• The Australian dollar fell 0.1% to $0.7090

Cryptocurrencies

• Bitcoin fell 0.5% to $23,671.08
• Ether fell 0.3% to $1,638.11

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.52%
• Australia’s 10-year yield was little changed at 3.57%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold fell 0.1% to $1,925.45 an ounce. BM/DM