Asian stocks swing higher as traders mull rates: markets wrap

Stocks in Asia edged higher and the dollar was little changed as investors weighed hawkish comments from Federal Reserve officials and geopolitical tensions.

A rebound in Chinese shares pushed a gauge of Asian stocks higher, while US futures fluctuated following a decline in the S&P 500 Index on Friday as it slid for a second week.

A report from Goldman Sachs Group Inc. tipping a rebound in Chinese stocks added a counterweight to the flow of news damping appetite for equities. Chinese lenders followed the central bank by keeping their benchmark lending rates unchanged Monday, with analysts expecting possible reductions in coming months to support the economic recovery.

The dollar was steady as it maintained gains against most of its Group-of-10 peers following a weekend that saw no cooling of US-China tensions. Beijing’s top diplomat labeled the American response to the balloon it shot down “hysterical” while his counterpart Antony Blinken said its entry into his nation’s airspace was “irresponsible.” Meanwhile, North Korea test-fired an intercontinental ballistic missile.

Above and beyond this, investors are focused on the shifting outlook for interest rates, with traders fully pricing in quarter-point interest rate increases at the Fed’s next two meetings after policy makers said Thursday that bigger hikes were not out of the question.

Fed officials such as Richmond President Thomas Barkin and Governor Michelle Bowman were the latest to stress the need to keep raising rates to tame inflation.

The dollar’s strength won’t last long once the Fed signals it’s comfortable with the level of rates, according to HSBC Holdings Plc. “Going into, say, late first quarter, second quarter, that’s where we think that the renewed decline in the dollar will start to take shape” as inflationary pressures recede and investors gain more visibility on China’s recovery, Paul Mackel, global head of FX research at the bank, said on Bloomberg Television.

The moves in currencies and bonds around Asia on Monday were modest, in part reflecting the Presidents’ Day holiday in the US. There was no cash Treasuries trading Monday.

Looking further ahead this week, investors will also be watching for more commentary on the American consumers as Walmart Inc. and Home Depot Inc. kick off a slew of retail earnings reports. Further signs of resilient economy could provide more reasons for the Fed to hold rates higher for longer.

Meanwhile, Morgan Stanley equity strategist Michael Wilson warned that even though economic situation appeared to have improved at the margin, with additional liquidity provided by central banks, it would not forestall an earnings recession. “The bear market rally that began in October from reasonable prices and low expectations has morphed into a speculative frenzy based on a Fed pause/pivot that isn’t coming,” he wrote in a note.

In commodities, oil gained on hopes that a Chinese demand rebound is picking up pace following the end of Covid Zero. Gold was little changed.

Key events this week:

• Earnings for the week are scheduled to include: Alibaba, Anglo American, AXA, BAE Systems, Baidu, BASF, BHP, Danone, Deutsche Telekom, Holcim, Home Depot, Hong Kong Exchanges & Clearing, HSBC, Iberdrola, Lloyds Banking Group, Moderna, Munich Re, Newmont, Nvidia, Rio Tinto, Walmart, Warner Bros Discovery
• US financial markets closed for Presidents’ Day holiday, Monday
• PMIs for Japan, Eurozone, UK, US, Tuesday
• US existing home sales, Tuesday
• US MBA mortgage applications, Wednesday
• The Federal Reserve minutes from Jan. 31-Feb. 1 policy meeting, Wednesday
• Eurozone CPI, Thursday
• US GDP, initial jobless claims, Thursday
• Atlanta Fed President Raphael Bostic speaks, Thursday
• G-20 finance ministers and central bank governors meet in India, Thursday-Friday
• Japan CPI, Friday
• BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:57 p.m. Tokyo time. The S&P 500 closed 0.3% lower on Friday
• Nasdaq 100 futures were little changed. The Nasdaq 100 closed 0.7% lower on Friday
• Japan’s Topix index rose 0.4%
• South Korea’s Kospi index rose 0.1%
• Hong Kong’s Hang Seng Index rose 0.8%
• China’s Shanghai Composite Index rose 1%
• Australia’s S&P/ASX 200 Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0687
• The Japanese yen was little changed at 134.05 per dollar
• The offshore yuan was little changed at 6.8718 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $24 510.43
• Ether rose 0.3% to $1,690.96

Bonds

• The yield on 10-year Treasuries declined five basis points to 3.81% on Friday
• Australia’s 10-year yield declined two basis points to 3.80%

Commodities

• West Texas Intermediate crude rose 0.5% to $76.69 a barrel
• Spot gold was little changed

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