Business Maverick

Business Maverick

Hong Kong stocks advance as Asia treads water before CPI: markets wrap

Hong Kong stocks advance as Asia treads water before CPI: markets wrap
Pedestrians pass a LVHM Moet Hennessy Louis Vuitton SE store at Harbour City shopping mall in Hong Kong, China, on Friday, 2 June 2023.

Asian stocks traded cautiously ahead of key inflation data that will provide fresh clues about the Federal Reserve’s policy outlook.

Equity benchmarks in Hong Kong rose, led by a rally in technology stocks. A gauge of Hong Kong-listed Chinese shares gained for a third day, taking its advance from a recent low to about 20%. Shares in Japan and mainland China edged lower with trading in the region muted by holidays in countries including South Korea.

“Traders are on edge for the US CPI for March,” Hebe Chen, a market analyst at IG Market Limited said. “It will bring a piece of heavy-weight evidence to either validate or disapprove of the Fed’s view that the hotter-than-anticipated readings in the previous two months were just a bump.”

Treasuries were little changed in Asian trading after advancing on Tuesday. Ten-year yields fell from their highest levels this year in a sign of short exposure being unwound before Wednesday’s US inflation reading. Markets have been tempering bets on Fed cuts as economic data remain strong, with officials pushing back against the need for easing.

Contracts for US equities were steady after the S&P 500 fell as much as 0.8% on Tuesday before finishing 0.1% higher. 

The movement in Japanese stocks came as investors assessed the risk of further interest-rate hikes this year in Japan. The central bank will likely consider raising its inflation forecast at a policy meeting later this month after surprisingly strong results from annual wage negotiations, according to people familiar with the matter. 

“It’s all caution out there, really,” said Kyle Rodda, senior market analyst at Capital.com. “Japan is the epicentre as far as Asian markets are concerned because the yen got dangerously close to breaking 152 again yesterday, and some combination of a hot CPI print and even slightly hawkish Fed minutes may send it through that level.”

Elsewhere in Asia, New Zealand’s dollar rose against the greenback after the central bank kept its key rate at 5.5% and said a restrictive policy stance remains necessary.

In commodities, oil held a two-day decline after an industry report pointed to a gain in US crude stockpiles, although simmering tensions in the Middle East are expected to cap losses. Meanwhile, gold slipped after extending its bull run to a fresh record.

Stocks rebound

After struggling throughout most of the session, the S&P 500 rose back above the 5,200 mark, with Tesla Inc. leading gains in megacaps. Nvidia sank as Intel unveiled a new version of its artificial-intelligence chip. 

US small-business optimism dropped to a more than 11-year low in March as sales expectations slumped and inflationary pressures remained a trouble spot, according to the National Federation of Independent Business.

Economists are forecasting that US consumer prices rose 0.3% in March on a monthly basis, both overall and excluding food and energy costs. The swaps market is pricing in around 65 basis points of Fed rate cuts by the end of this year — which is less than what the central bank forecast last month. 

“CPI is the critical number this week,” said Andrew Brenner at NatAlliance Securities. “The fear is that CPI has continued to be a thorn in the side of the Fed. But positioning is strongly bearish, and to quote some of the old traders we worked with in the past, ‘whatever hurts the most traders, when they are strongly positioned, is what happens’.”

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.