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Asian stocks fluctuate as traders weigh rates path: markets wrap

Asian stocks fluctuate as traders weigh rates path: markets wrap
A worker counts out rand banknotes for change at the cash register inside a Spar supermarket in Die Wilgers, Pretoria on Thursday, 14 July 2022. (Photo: Waldo Swiegers/Bloomberg)

Equities in Asia were mixed on Monday after heavy selling on Wall Street late last week as investors ratcheted up forecasts for US interest rates following hot inflation data. 

Shares dropped in Australia and South Korea while fluctuating in China and Japan. Hong Kong’s Hang Seng Index initially looked on course to erase its advance for 2023 before swinging marginally higher, helped along by a jump of as much as 20% in shares of Haidilao International Holding following an upbeat profit forecast.

US futures ticked higher, taking the edge off Friday’s slump of more than 1% for the S&P 500 and Nasdaq 100, which each suffered their worst week since December.

Investor jitters over riskier assets follows an unexpected acceleration in January of the personal consumption expenditures price index, the Federal Reserve’s favoured inflation gauge. The PCE data release on Friday prompted a swift repricing of interest rate forecasts, with traders now pricing US rates to peak at 5.4% this year, compared to expectations held just a month ago of rates to peak at less than 5%.

“It seems premature to call a turnaround in risk this week,” Chris Weston, head of research for Pepperstone Group Ltd., in a Monday note. “The clouds of uncertainty remain with us – the market’s consensus view that inflation would head lower through the year has clearly been challenged.”

The yen strengthened against the dollar after a sharp fall on Friday. Bank of Japan governor nominee Kazuo Ueda is speaking again in the Japanese parliament on Monday. Inflation data released last week showed prices in the nation were rising at the fastest pace in four decades, placing pressure on the central bank to reassess its loose policy settings.

The yield on the 10-year Treasury dipped by one basis point in Asia on Monday after a jump of seven basis points Friday. Elevated yields continued to support the dollar, with a gauge of greenback marginally lower after rising 0.7% on Friday.

The Australian 10-year yield rose seven points while the New Zealand 10-year yield climbed three basis points and was near the highest level since November.

Data due later in the day will provide extra context for the global economic outlook. Eurozone economic and consumer confidence is due, along with durable goods data from the US. 

On the geopolitical front, the US will impose a 200% tariff on all imports of Russian-made aluminium, as well as aluminium products made with metal smelted or cast in the country, in a move that could ripple through global manufacturing supply chains.

Late last week, Treasury Secretary Janet Yellen warned China and other nations against providing material support to Russia, saying any such actions would amount to an evasion of sanctions and would “provoke very serious consequences”. BM/DM

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