Markets Wrap

Aussie bonds fall before US CPI amid Asia holidays: markets wrap

Aussie bonds fall before US CPI amid Asia holidays: markets wrap
The Sydney Harbour Bridge, top left, and the Sydney Opera House, top right, in Sydney, Australia, on Tuesday, Feb. 6, 2024. Australia’s central bank kept interest rates unchanged at its first meeting of a revamped policy schedule and signaled further tightening remains possible, sending the currency and bond yields higher. Image: Bloomberg

Australian bonds and stocks fell before US inflation data due on Tuesday. A swath of markets across Asia are shut for Lunar New Year holidays.

Aussie and New Zealand bonds opened lower after Treasuries slipped for a third day Friday when investors wound back bets on Federal Reserve interest-rate cuts this year. Trading of cash Treasuries is closed in Asia due to a holiday in Japan.

Asian markets shut on Monday also include China, Hong Kong, Singapore, Taiwan, South Korea, Malaysia and Vietnam.

The yen edged higher against the dollar after sliding to a two-month low Friday following comments from central bankers that the Bank of Japan will take its time raising interest rates. Japan’s currency has weakened against all its G10 peers this year.

US equity futures were little changed after shares ended on Friday with a rally that pushed the S&P 500 to a close above 5,000 index points for the first time. European stock futures crept higher.

Bitcoin climbed toward last month’s high of just above $49,000, which was set when a number of US spot exchange-traded funds began trading.

US inflation data due on Tuesday will help identify the path ahead for the Fed. The annual inflation rate is forecast to have slowed to 2.9% in January from 3.4% the prior month, according to consensus estimates of economists. That would be the first reading below 3% since March 2021.

“High inflation rarely has been tamed without precipitating a recession,” Ed Yardeni, president of Yardeni Research, wrote in a research note. “The Fed has steered inflation down toward its 2% target, while allowing the US economy to fly, avoiding a hard landing.”

The S&P 500 rose 0.6% on Friday to set a fresh record, while the Nasdaq 100 jumped 1%. The gains were helped by technology stocks and positive fourth-quarter earnings. Four in five of the companies that have reported their results so far have exceeded expectations, brightening the outlook for corporate profits.

The advance for US stocks came even as traders pushed back expectations for Fed policy easing after relatively hawkish commentary from central bankers and economic data showing no immediate need to trim interest rates.

Swaps market pricing shows investors anticipate the chance of a Fed cut in March at 15%, down from 65% a month ago. Traders now foresee four 25-basis-point rate cuts in 2024, down from seven forecast at the end of last year.

In commodities, oil prices fell for the first time in six days after Iran’s foreign minister said the war in Gaza may be nearer to a “diplomatic solution”.

In Asia, data set for release on Monday include inflation and industrial output reports for India. 


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