The Walt Disney Co. Mickey Mouse logo is seen on a fence at the company's studios in Burbank, California, U.S., on Monday, May 9, 2016. (Photo: Patrick T. Fallon/Bloomberg via Getty Images) Japanese and Australian shares rose after initial declines, mainland China stocks climbed while Hong Kong and South Korean equities fell.
US equity futures edged higher, partly retracing declines on underlying benchmarks on Wednesday. The S&P 500 fell 0.7%, while the Nasdaq 100 dropped 1.1%, weighed down by a 4.7% drop for Nvidia Corp., as investors rethink the artificial-intelligence frenzy that has helped propel tech shares higher this year.
Long-dated Treasury yields were steady in Asia after falling in the previous session as investors showed fresh demand for 10-year paper. On Wednesday, a $38-billion auction for 10-year Treasuries was awarded at 3.999%, the third straight new issue to pay a fixed rate of less than 4%. The two-year yield, which is more sensitive to interest rates, rose six basis points. Australian and New Zealand bond yields traded slightly higher.
Those movements come ahead of July’s consumer price index data due later on Thursday. Economists anticipate a slight increase in the headline figure, in part linked to higher oil prices, while core inflation is expected to fall, extending a downward trend that Bloomberg Economics believes will support a rate pause when the Fed next meets in September.
Even if inflation overshoots expectations, the Fed will likely feel its policy is restrictive enough as manufacturing struggles and the jobs market shows signs of softening, according to Fawad Razaqzada, a market analyst at City Index and Forex.com. That means a “small beat” wouldn’t matter too much, he noted.
“A goldilocks outlook in the US is what stock market investors on Wall Street have been enjoying this year – until the recent weakness,” Razaqzada said. “They will be looking for signs that the health and sentiment of the consumer remains positive, enough not to increase the risks of a further Fed rate increase, and yet not too depressing to raise recession alarm bells.”
Currency markets were little changed. The offshore yuan strengthened for a second day while the Bloomberg dollar index was steady and the yen was little changed.
In Asia, the Reserve Bank of India will deliver its latest monetary policy decision, with economists anticipating interest rates to remain unchanged. Alibaba Group Holding Ltd will deliver corporate results, while investors are also focused on Country Garden Holdings Co. after the Chinese developer missed a dollar bond payment.
Investors were also focused on rising energy prices. Oil eased lower after two days of gains greater than 1% that pushed crude to a nine-month high. Attention was also fixed on surging European natural gas prices after a 28% rise Wednesday that was attributed to the possibility worker strikes in Australia could reduce supply. Citigroup Inc. analysts predict this could cause European gas and Asian LNG contracts for January to double.
The price of rice also surged to the highest level in almost 15 years, as dry weather threatens Thailand’s crop.
In US corporate earnings, Walt Disney Co. reported profits that exceeded expectations and said it will raise the prices of its streaming services, including a 27% increase for the advertising-free version of the flagship Disney+. The company’s shares rose in after-hours trading on the news. Illumina Inc. fell after the DNA-sequencing firm cut its profit outlook and Wynn Resorts Ltd.’s earnings per share beat analyst forecasts.
Elsewhere, gold edged higher after falling to its lowest level in a month with the precious metal trading at around $1,918 per ounce. DM