Asia Stocks, US Futures Rise as Rate Path Mulled: Markets Wrap

(Bloomberg) -- Stocks in Asia and futures climbed Wednesday and Treasury yields stabilized after a sharp retreat as markets assessed the outlook for Federal Reserve monetary tightening. The dollar gained. 

An MSCI Inc. gauge of Asia-Pacific shares rose with most markets modestly in the green. US futures were higher after stocks fell overnight, with the Nasdaq 100 down more than 2% as Snap Inc.’s profit warning pummeled companies that rely on digital advertising. 

In China, the country’s strict Covid policy is outweighing broad measures to support growth and keeping investors wary. The nation’s central bank and banking regulator urged lenders to boost loans in the latest effort to shore up the battered economy. 

Treasuries steadied after a flight to havens sent yields lower, while traders dialed back the expected pace of Federal Reserve hikes. Money-market traders priced in about 135 basis points of rate increases over the central bank’s next three policy meetings, down from about 141 basis points at Monday’s close.

Read: Rupture in the Stock-Bond Bolt Shows Recession Angst Rising Fast

New Zealand’s central bank raised interest rates by half a percentage point for a second straight meeting and forecast more aggressive hikes to come to tame inflation.

Investors are fretting growth will slow dramatically amid tighter monetary conditions to taper surging inflation, the war in Ukraine and China’s lockdowns that are chocking supply chains. Sales of new US homes fell more than expected in April, and the Richmond Fed’s measure of business activity fell to a two-year low. The Fed minutes from its last meeting out Wednesday may provide some clarity.

“If we are really at that point now where the Fed is delivering on what’s priced in, which is determinant on inflation not surprising further, we think that might start to cool some concerns about this continued repricing higher of Fed rates and of course the impact on growth,” Manpreet Gill, Standard Chartered Private Bank head of FICC investment strategy, said on Bloomberg Television. “That gives up a bit of room for optimism.”

Fed Bank of Atlanta President Raphael Bostic, who’s one of the central bank’s dovish policy makers, urged his colleagues to proceed with care. The Fed raised interest rates by 50 basis points earlier this month and Chair Jerome Powell signaled it was on track to make similar-sized moves at its meetings in June and July, a plan that both hawks and doves have since embraced to cool the hottest inflation since the 1980s.

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Here are some key events to watch this week:

• FOMC minutes Wednesday
• ECB publishes its Financial Stability Review Wednesday
• Bank of Korea rate decision Thursday
• US GDP, initial jobless claims Thursday
• US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.6% as of 1:21 p.m. in Tokyo. The S&P 500 fell 0.8%
• Nasdaq 100 futures rose 0.9%. The Nasdaq 100 fell 2.2%
• Japan’s Topix index rose 0.1%
• Australia’s S&P/ASX 200 Index gained 0.7%
• Kospi index was up 0.8%
• Hang Seng Index rose 0.6%
• Shanghai Composite Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The Japanese yen was at 127.07 per dollar, down 0.2%
• The offshore yuan was at 6.6727 per dollar, down 0.2%
• The euro fell 0.2% to $1.0711

Bonds

• The yield on 10-year Treasuries gained about one basis point to 2.76%
• Australia’s 10-year bond yield fell seven basis points to 3.25%

Commodities

• West Texas Intermediate crude rose 1.2% to $111.06 a barrel
• Gold was at $1,862.51 an ounce, down 0.2%

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