Asian Stocks to Fall as US CPI Shifts Into Focus: Markets Wrap

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(Bloomberg) — Shares in Asia were primed for a muted open Monday as investors look ahead to US inflation data due Tuesday that is expected to show a further slowing in core prices.

Equities in Australia and share futures for Japan fell, while those for Hong Kong inched higher. Contracts for US stocks slipped in Asian trading, extending the downbeat end to the week in the US, where both the S&P 500 and the Nasdaq 100 declined.

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Support in Hong Kong equity futures follows positive signs for the Chinese economy over the weekend, when authorities reported the first rise in consumer prices since August. The 0.7% increase in February CPI exceeded consensus estimates and is welcome news for investors worried about deflation in the world’s second largest economy.

Currencies were steady early Monday in Asia after an index of the dollar ended last week 1% lower, its worst weekly decline since December. The decline partly reflected renewed strength in the yen. The Japanese currency rallied 2% last week, its best since July last year, on heightened speculation the Bank of Japan will end its negative interest rate policy.

“Perhaps, Japan is finally coming out of this deflationary vortex and that could have profound implications on Japanese assets,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi Asset Management, explaining that this will be supportive for the yen through repatriation flows, mainly going into stocks.

Data in Japan, including gross domestic product figures, will help shine further light on the Japanese economy and the path ahead for the central bank. Elsewhere in Asia, Chinese reports on new lending and money supply could be released as soon as Monday, while markets are closed in Indonesia.

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Tuesday’s US consumer price index figures will dominate the economic data reports this week. The core prices gauge is seen rising 0.3% in February from a month earlier, and 3.7% on a year-over-year basis — which would be the smallest annual rise since April 2021.

Further moderation in US prices would support the disinflation narrative that broadly remains in tact, despite a pullback in the number of Federal Reserve rate cuts expected this year. Swaps pricing shows three cuts are anticipated in 2024, down from six at the start of the year.

Last week’s US jobs data did little to change that outlook. The jobless rate touched a two-year high, even as the number of new jobs added exceeded estimates. The mixed signal points to a slowly cooling labor market that, for now, supports expectations for a soft landing in the US economy.

The jobs report “didn’t necessarily amount to an ‘all-clear’ signal for the Fed, but there also didn’t appear to be anything in it that would derail its plan to cut rates,” said Chris Larkin at E*Trade from Morgan Stanley.

Yields in Australia and New Zealand were largely flat in early trading on Monday, reflecting the stable trading in Treasuries on Friday, when the 10-year Treasury benchmark declined around 1 basis point.

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The pullback in US equities on Friday reflected a decline for most of the so-called Magnificent Seven stocks that have powered the US market to fresh highs this year. Nvidia, which has added around $1 trillion to its market value in 2024 alone, fell 5.6%. 

In commodities, oil prices fell early Monday. Gold ended Friday almost 1% higher at around $2,180, and Bitcoin traded just below $69,000, holding its rally over the past few weeks.

Key Events This Week:

• Japan M2 money stock, GDP, Monday
• CPI reports for Argentina, Brazil, Germany, India, US, Tuesday
• UK jobless claims, unemployment, Tuesday
• Japan PPI, Tuesday
• India industrial production, Tuesday
• Mexico international reserves, industrial production, Tuesday
• Philippines trade, Tuesday
• Turkey industrial production, current account, Tuesday
• EU finance ministers meet in Brussels, Tuesday
• ECB Governing Council Member Robert Holzmann speaks, Tuesday
• Eurozone, UK industrial production, Wednesday
• India trade, Wednesday
• South Korea jobless rate, Wednesday
• ECB Governing Council member Yannis Stournaras speaks, Wednesday
• Swedish Riksbank First Deputy Governor and Deputy Governor speak, Wednesday
• Saudi Arabia, Spain CPI, Thursday
• US PPI, retail sales, initial jobless claims, business inventories, Thursday
• Australia Treasurer Jim Chalmers delivers pre-budget address, Thursday
• Canada housing starts, Friday
• China property prices, Friday
• France, Italy, Poland CPI, Friday
• Indonesia trade, Friday
• Japan tertiary index, Friday
• New Zealand PMI, Friday
• Philippines overseas remittances, Friday
• Sri Lanka GDP
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday
• Japan’s largest union federation announces results of annual wage negotiations, Friday

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Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 8:05 a.m. Tokyo time
• Hang Seng futures rose 0.2%
• Australia’s S&P/ASX 200 fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0938
• The Japanese yen rose 0.1% to 146.89 per dollar
• The offshore yuan was little changed at 7.2011 per dollar
• The Australian dollar was little changed at $0.6619

Cryptocurrencies

• Bitcoin fell 1.2% to $68,589.35
• Ether fell 1.7% to $3,842.32

Bonds

• Australia’s 10-year yield advanced one basis point to 3.98%

Commodities

• West Texas Intermediate crude fell 0.4% to $77.71 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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