Stocks gyrate on fed minutes, China crosswinds: markets wrap

(Bloomberg) -- Asian stocks and US futures fluctuated in choppy trading Thursday as traders weighed downbeat remarks on China’s economy by Premier Li Keqiang with Federal Reserve minutes that struck a less hawkish note. 

An MSCI Inc. gauge of Asia-Pacific shares wavered as Japan edged up, while Hong Kong slipped. S&P 500 and Nasdaq 100 futures swerved between gains and losses. Overnight, the S&P 500 rebounded from a drop to end higher, while the tech-heavy Nasdaq 100 outperformed. 

Chinese stocks saw mixed trade as investors remain watchful of measures to combat an economic malaise from strict Covid curbs. China’s economy is in some respects faring worse than in 2020 when the pandemic first emerged, Premier Li said, urging efforts to reduce a soaring unemployment rate.

“We’ve seen a couple of false dawns where we’ve heard what sounded like very encouraging words, but so far we haven’t seen the follow-up actions coming through the policy space - nothing in the shock-and-awe category to give markets confidence to move forward,” Ben Powell, BlackRock Investment Institute Chief APAC strategist, said on Bloomberg Television. 

Yields on 10-year Treasuries edged higher, as did two-year rates, which are more sensitive to imminent policy moves. Fed policy makers indicated their aggressive set of moves could leave them with flexibility to shift gears later if needed. The dollar slipped.

Investors took some comfort from the Fed minutes that didn’t show an even more aggressive path being mapped to tackle elevated prices. Still, volatility has spiked as the risk of a US recession, the impact from China’s lockdowns and the Ukraine war simmer.

“If inflation gets tame enough over summer, there may not be continued raising of rates,” Carol Pepper, Pepper International chief executive officer, said on Bloomberg TV, adding that investors should look to buy tech stocks after the selloff. “Stagflation, I just don’t think that’s going to happen anymore. I think we are going to be in a situation where inflation will start tapering down and then we will start going into a more normalized market.” 

Most US policy makers saw half-point rate increases as appropriate at the next two meetings, consistent with Chair Jerome Powell’s comments. While they noted the potential for rates to go high enough to constrain the economy, there were hints of a possible pause -- an “expedited” tightening would leave the Fed “well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.”

Markets continued to show traders pricing in 100 basis points of rate hikes over the next two meetings.

The Bank of Korea raised its key interest rate on Thursday as newly installed Governor Rhee Chang-yong demonstrated his intention to tackle inflation at his first policy meeting since taking the helm. New Zealand’s central bank has also shown its commitment this week to combat surging prices.

Read: Unbroken Buyers Push S&P 500 to Fourth Straight Late-Day Bounce

Here are some key events to watch this week:

• 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 fell 0.2% as of 12:15 p.m. in Tokyo. The S&P 500 rose 1%
• Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 1.5%
• Topix index rose 0.3%
• Australia’s S&P/ASX 200 Index fell 0.5%
• Kospi index rose 0.2%
• Hang Seng Index fell 1.1%
• Shanghai Composite Index fell 0.2%
• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The Japanese yen was at 127.39 per dollar
• The offshore yuan was at 6.7244 per dollar, down. 0.2%
• The euro was at $1.0700

Bonds

• The yield on 10-year Treasuries rose about one basis point to 2.76%
• Australia’s 10-year bond yield was at 3.25%

Commodities

• West Texas Intermediate crude rose 0.6% to $110.99 a barrel
• Gold was at $1,851.15 an ounce

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