Asian stocks are set for mild gains after US equities struggled and Treasuries slumped following data reinforcing the case for the Federal Reserve to keep interest rates higher for longer. Oil climbed as the Israel-Hamas conflict intensified.
Futures for benchmarks in Australia and Japan pointed to gains of about 0.3%, while those for Hong Kong were little changed. The S&P 500 erased gains Tuesday, with Nvidia Corp. leading a slump in technology stocks as the US restricts the sale of chips the company designed for the Chinese market. Two-year Treasury yields hit the highest since 2006 as swap contracts tied to Fed rate decisions showed traders are pricing in more than 60% odds that policymakers will raise interest rates by a quarter percentage point in January.
“Good news about the economy is once again bad news, since it will keep policymakers on the fence on delivering more tightening,” said Edward Moya, senior market analyst for the Americas at Oanda. “It seems the US economy isn’t ready to head into a recession just yet.”
US retail sales exceeded all forecasts and industrial production strengthened last month, fresh evidence of a resilient American consumer whose spending is helping stabilize manufacturing. The reports prompted a slew of economists, from Goldman Sachs to JPMorgan Chase & Co. and Morgan Stanley, to boost their tracking estimates for third-quarter gross domestic product.
Traders also kept a close eye on the latest geopolitical events. Arab leaders canceled a meeting with Joe Biden after reports of a blast at a hospital in Gaza, as the US President prepares to arrive in Israel as a show of solidarity after the Oct. 7 attack by Hamas — which is designated a terrorist organization by the US and European Union. Oil climbed 1.3% in early Asia trading.
Hundreds of Palestinians were killed in an explosion at a Gaza City hospital on Tuesday, according to officials in the Hamas-controlled territory who said it was the result of an Israeli airstrike. Israel’s army said the hospital was hit in a failed missile attack by militants from the Islamic Jihad group.
The Bank of Israel underscored the urgency of steadying the shekel following its slide to an eight-year low, reversing expectations among traders who bet on a big interest-rate cut as soon as next week.
Elsewhere, the Bank of Japan is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal, according to people familiar with the matter. Following news of the central bank price view, the yen briefly strengthened.
Key events this week:
- Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
- China GDP, retail sales, industrial production, Wednesday
- UK CPI, Wednesday
- Eurozone CPI, Wednesday
- Morgan Stanley, Netflix, Tesla earnings, Wednesday
- Federal Reserve issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
- Australia unemployment, Thursday
- Japan trade, Thursday
- China property prices, Thursday
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- Hang Seng futures were little changed as of 7:18 a.m. Tokyo time
- Nikkei 225 futures rose 0.3%
- S&P/ASX 200 futures rose 0.3%
- The S&P 500 was little changed
- The Nasdaq 100 fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The Japanese yen was little changed at 149.78 per dollar
- The offshore yuan was little changed at 7.3261 per dollar
Cryptocurrencies
- Bitcoin was little changed at $28,472.19
- Ether rose 0.2% to $1,563.97
Bonds
- The yield on 10-year Treasuries advanced 13 basis points to 4.83%
- Australia’s 10-year yield advanced eight basis points to 4.63%
Commodities
- Spot gold was little changed
- West Texas Intermediate crude rose 1.3% to $87.74 a barrel
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.