(Bloomberg) -- Asian stocks look set to open higher after US markets traded in a narrow range ahead of inflation data that could signal whether the Federal Reserve will further raise interest rates.
Futures for equity benchmarks in Australia and Japan rose, while contracts for Hong Kong were little changed. US futures were marginally higher in early trading in Asia.
The Aussie was steady, holding Tuesday’s gains versus a broadly weaker dollar, and the yen fluctuated after falling for a fourth day versus the greenback.
The S&P 500 closed almost flat on the day Tuesday, while the tech-heavy Nasdaq 100 fell for the fifth session in six as investors assessed the likelihood of another rate increase in May.
US Treasuries were mixed, with the policy-sensitive two-year yield higher above 4%. Swap contracts priced about three-in-four odds of another quarter-point Fed hike in May, down slightly from Monday. Traders predict rates will peak around 5%, with the Fed then cutting by at least 50 basis points before the end of 2023.
Comments by Fed officials signaled a divide over the next policy move. Chicago Fed President Austan Goolsbee said Tuesday the US central bank should exercise “prudence and patience” in raising interest rates as policymakers assess just how much last month’s banking turmoil will contribute to tighter lending conditions. Meanwhile, New York Fed President John Williams said officials still have more work to do to bring down prices, echoing remarks from other colleagues in recent days.
Headline inflation is expected to slow for both the monthly and yearly measures, while the core reading is forecast to ease slightly month-over-month, which corresponds to 5.6% year-on-year and above the headline 5.1% print. Core outpacing headline inflation suggests “recent disinflation has a strong transitory component, and underlying inflation is falling much more slowly,” according to Bloomberg Intelligence.
“If inflation runs hotter than expected, it’ll undermine the idea that the Fed will be cutting rates aggressively by year-end, and that will leave markets susceptible to a pullback,” Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, wrote.
Read more: Goldman’s Flood Preps Market for CPI That Will Shatter the Calm
In a report Tuesday, the International Monetary Fund warned it was too soon to sound the all-clear from the turmoil that’s shaken the world financial system, saying the banking breakdowns will likely be a drag on global economic growth. US banks on Friday will kick off what’s forecast to be the worst earnings season since the depths of the pandemic crisis.
Cracks in 2023’s equity advance are emerging, as hedge funds and other speculators amass the deepest short position since November 2011 when the US sovereign credit rating was cut. Bank of America Corp. data showed investors were selling US stocks across the board for the past two weeks as investors position ahead of Wednesday’s closely watched inflation print.
Elsewhere, Bitcoin advanced for the fourth day, blowing past the key $30,000 level for the first time in 10 months. Oil rose above $81 a barrel, holding gains as the first of a spate of supply-and-demand projections scheduled this week forecast a modest rise in US production.
Key events this week:
Canada rate decision, Wednesday
US FOMC minutes, CPI, Wednesday
Richmond Fed’s Thomas Barkin speaks, Wednesday
China trade, Thursday
US PPI, initial jobless claim, Thursday
US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Some of the main market moves as of 7:20 a.m. Tokyo time:
S&P 500 futures were little changed. The S&P 500 was little changed
Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7%
S&P/ASX 200 futures rose 0.3%
Nikkei 225 futures rose 0.4%
Hang Seng futures were little changed
The Bloomberg Dollar Spot Index fell 0.2%
The euro was little changed at $1.0916
The yen was unchanged at 133.68 per dollar
Bitcoin rose 0.1% to $30,225.71
Ether was little changed at $1,894.42
The yield on 10-year Treasuries advanced one basis point to 3.43%
West Texas Intermediate crude fell 0.2% to $81.39 a barrel
Spot gold was unchanged at $2,003.62 an ounce
(Source: Yahoo Finance), all rights reserved by original source.