Asian stocks were mixed in largely directionless trading before a raft of inflation data this week that may give a better guide on the outlook for central-bank policy. Japanese markets are shut for a holiday.
Benchmark indexes gained in South Korea and Taiwan but dropped in Hong Kong and mainland China. US equity futures edged up after the S&P 500 closed marginally higher on Friday following reports showing US job growth beat expectations but the service sector slowed.
While US equities gained on Friday, global stocks still slid the most since October last week as markets were rattled by a deluge of corporate issuance, and the Fed indicated it was in no rush to cut interest rates. Inflation reports are due from Japan on Tuesday, the US on Thursday and China on Friday.
Markets are trying to anticipate what the Fed is going to do, Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Television. “The only reason they would cut in March is if they had some sort of credit situation to respond to. Otherwise, just even changing their narrative a little bit to a little bit more of a dovish tilt has loosened financial conditions somewhat.”
The dollar weakened against most of its G10 peers, with the Aussie making the biggest gains. The yen was little changed after posting its worst week in 16 months last week amid debate over when the Bank of Japan will start to exit its accommodative policy settings.
Treasury 10-year futures edged lower, while there was no trading of cash Treasuries in Asia due to the Japanese holiday.
Thursday’s US inflation print is expected to see the underlying measure ease further to 3.8% year-on-year in December from 4% in the month prior, according to a Bloomberg survey. Reports in China and Tokyo — a barometer for broader Japan — are also due, as investors look to the People’s Bank of China for policy easing.
“Tokyo’s headline and core rates are seen continuing to ease and that will underscore the lack of pressure on the BOJ, especially in the aftermath of the recent earthquake, to change policy,” said Marc Chandler, chief market strategist at Bannockburn Global. While China’s expected to report less disinflation, “the economy needs more support and a cut in the benchmark one-year Medium Term Lending Facility later this month seems increasingly likely,” he said.
The US jobs report last week initially cooled wagers on faster and deeper rate cuts from the Fed, but swaps traders eventually reformed bets on roughly 140 basis points of easing this year, with about a two-thirds chance of a decrease in March. Some on Wall Street kept faith in the central bank’s ability to cool the economy while side-stepping a downturn.
Elsewhere, Boeing Co. shares will be in focus when Wall Street opens as groundings of the 737 Max 9 aircraft gathered pace globally after a fuselage section on a new Alaska Airlines jet blew out during flight.
In commodities, oil was steady after recording a weekly gain. Sustained tensions in the Red Sea and supply disruptions in Libya had offset indications of market weakness, including Saudi Arabia cutting official selling prices to buyers in all regions.