(Bloomberg) — Australian and New Zealand government bonds fell on Friday, leading to a sell-off in U.S. Treasuries ahead of this week’s U.S. inflation data that will help clarify the Federal Reserve’s path forward. I responded.
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Both countries’ 10-year bond yields rose 3 basis points in early trading Monday, following a modest rise in the U.S. 10-year bond yield on Friday. Major currencies were largely stable after Friday’s drop in the dollar index, while Australian shares fell.
There will be widespread closures across Asia on Monday, with markets in Japan, China, Hong Kong, Singapore, Taiwan, South Korea, Malaysia and Vietnam closed for Lunar New Year. U.S. stock markets ended higher on Friday, with the S&P 500 index ending above 5,000 index points for the first time.
After hitting a two-month low on Friday, the yen was almost unchanged at 149 yen to the dollar on Monday. The Bank of Japan weakened after comments from central bank officials that raising interest rates would take time. The yen has been the worst performer among the group of 10 currencies this year.
U.S. inflation data released on Tuesday will be crucial for the Fed. According to consensus estimates, year-on-year headline inflation is expected to be 2.9%, the first time it has fallen below 3% since March 2021. Core inflation is expected to decline slightly to 3.7% annually. That’s according to the average forecast of economists surveyed by Bloomberg.
“High inflation is rarely contained without triggering a recession,” Ed Yardeni, president of Yardeni Research, said in a note Monday. “The Fed is lowering inflation toward its 2% goal while allowing the U.S. economy to fly and avoid a hard landing.”
On Friday, the S&P 500 rose 0.6% to a new record, while the Nasdaq 100 rose 1%. Positive signs from tech stocks and fourth-quarter earnings reports also contributed to the rally. Four out of five companies that have reported earnings so far this season have exceeded expectations, giving analysts a brighter outlook for corporate profits.
Traders are boosting expectations for Federal Reserve policy easing after comments from hawkish central bankers and economic data showing there is no immediate need for interest rate cuts. Despite this, US stocks rose.
Swap market pricing shows investors expect a 15% chance of a Fed rate cut in March, down from 65% the previous month. Traders also expect four rate cuts in 2024, down from seven expected at the end of last year.
In commodity markets, crude oil prices rose on Friday, capping a five-day streak of gains in U.S. benchmark West Texas Intermediate prices. Those gains could be curtailed following comments by Iran’s foreign minister over the weekend that the war in Gaza could move closer to a “diplomatic solution.”
In Asia, a dataset will be released that includes reports on India’s inflation and industrial production.
This week’s main events:
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India CPI, Monday
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Minneapolis Fed President Neel Kashkari, Fed President Michelle Bowman and Fed President Tom Barkin speak on Monday
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ECB Executive Board Member Piero Cipollone and Chief Economist Philip Lane speak on Monday
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US Consumer Price Index, Tuesday
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UK unemployment rate, Tuesday
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Japan’s producer prices, Tuesday
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UK inflation Wednesday
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Inflation in Argentina Wednesday
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Eurozone GDP, industrial production, Wednesday
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Russian CPI, Wednesday
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Indonesia presidential election Wednesday
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Bank of England Governor Andrew Bailey speaks on Wednesday
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ECB Executive Board member Boris Vujicic and Vice President Luis Deguindos meet
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Chicago Fed President Austan Goolsby speaks Wednesday
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Australian job information Thursday
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Japan’s GDP, Thursday
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Poland, Spain, Saudi Arabia CPI, Thursday
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UK GDP, Thursday
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U.S. new jobless claims, retail sales, Thursday
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Central Bank of the Philippines holds interest rate meeting on Thursday
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ECB President Christine Lagarde speaks on Thursday
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Fed Director Christopher Waller speaks Thursday
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Bank of England policymakers Katherine Mann and Megan Green speak on Thursday
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French consumer price index, Friday
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Malaysian GDP, Friday
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South Korea’s unemployment rate, Friday
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U.S. housing starts, producer prices, Friday
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San Francisco Fed President Mary Daly and Fed Vice Chair for Supervision Michael Barr speak on Friday
The main movements in the market are:
stock
currency
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The euro was almost unchanged at $1.0781.
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The Japanese yen remained almost unchanged at 149.28 yen to the dollar.
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The offshore yuan was little changed at 7.2187 yuan to the dollar.
cryptocurrency
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Bitcoin rose 0.4% to $48,141.48
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Ether fell 0.3% to $2,505.28.
bond
merchandise
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West Texas Intermediate crude rose 0.8% to $76.84 per barrel.
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Spot gold fell 0.5% to $2,024.26 an ounce.
This article was produced in partnership with Bloomberg Automation.
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