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Asian stocks mixed before US CPI, Japan bonds drop: markets wrap

Asian stocks mixed before US CPI, Japan bonds drop: markets wrap
A view of Persian Gulf from inside Devon, an oil tanker transferring oil to exporting markets on 23 March 2018.

Stocks in Asia were mixed following cautious trading on Wall Street as traders awaited US inflation data that’s set to influence the timing of the Federal Reserve’s pivot to monetary easing.

Japanese shares fell for a second day amid growing speculation the central bank will tweak its policy when it meets next week. Australian and South Korean equities rose.

Japan’s 10-year yield climbed to the highest level in three months following a media report that said policymakers will end negative interest rates this month if wage data comes out strong. Producer price data released early on Tuesday beat estimates.

The chance of the BOJ reversing its negative-rate policy will be pretty high if the spring wage negotiations end up with above 4% increase, said Kelvin Tay, chief investment officer at UBS Global Wealth Management in Singapore. 

Any appreciation in the yen as a result “will likely lead to a negative performance on the Japanese stock market”, he said in an interview on Bloomberg Television. “Therefore we’re actually quite wary of that.”

Hong Kong stocks climbed for a third day, while state-backed developer China Vanke Co. declined after Moody’s Ratings stripped the company’s investment-grade credit rating and warned of potential further cuts.

Shares of steel-related companies in Asia dropped, following iron ore’s biggest slide since 2022.

US stock futures rose after both the S&P 500 and the Nasdaq 100 closed marginally lower on Monday. Investors are awaiting more clues on whether the recent uptick in US consumer prices was just a blip or an indication the disinflationary trend has hit a roadblock. After closing at record highs 16 times this year, the S&P 500 is showing signs of overheating, spurring warnings about a near-term consolidation. 

US consumer expectations for inflation over the next three years climbed in February, according to a New York Fed survey. Those figures came ahead of data on Tuesday that’s forecast to show inflation abated only gradually last month — illustrating why US officials are in no rush to cut interest rates.

Treasuries were little changed after falling on Monday, with traders bracing for another flurry of high-grade corporate debt sales. The dollar slightly weakened against most of its G10 peers.

While the S&P 500 has fallen on just four CPI reporting days in the past 12 months, volatility is picking up in those sessions. Over the past six months, the equity gauge has moved about 0.8% in either direction on the day CPI has been released, according to data compiled by Bloomberg. That’s up from less than 0.5% in September.

Investors are likely already incorporating a lot of good news into stock prices and moving ahead of incoming data that supports the soft-landing narrative, according to Anthony Saglimbene at Ameriprise. 

“Stocks are likely overdue for some consolidation or even an extended period of modest declines at some point in the year,” he said. “Without a meaningful shift in the fundamental picture, we suspect investors would welcome such a downdraft and treat the event as a buying opportunity.”

Oil ticked higher following a three-day drop ahead of a series of market reports and US inflation data. Bitcoin topped $72,000 for the first time, advancing for a sixth day on the back of inflows into US exchange-traded funds. 

Elsewhere, Argentina’s central bank unexpectedly cut its benchmark interest rate to 80% from 100%.

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