(Bloomberg): Asian markets are mixed as U.S. stocks decline slightly and strong U.S. factory data strengthens expectations that the Federal Reserve will be in no hurry to cut interest rates. It was poised to become.
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Australian stock prices rose slightly after the Easter holiday, while Japanese stock futures rose on Tuesday, supported by a weaker yen. The Hong Kong stock market also took a lull. U.S. futures were little changed after the S&P 500 index fell 0.2% on Monday and the Nasdaq index rose by a similar amount.
Government bond yields in Australia and New Zealand rose in response to moves in US Treasuries. U.S. Treasuries fell across the curve on Monday, with the 10-year Treasury yield rising more than 10 basis points, as manufacturing expanded unexpectedly for the first time since September 2022, raising input costs.
The report lowered the amount of Fed relief factored into this year’s swap contracts to about 65 basis points, less than policymakers expected. The stock market also lost momentum after the S&P 500 index rose for five consecutive months.
“Investors are certainly front and center on the possibility of a more hawkish shift by the Fed,” said Jose Torres of Interactive Brokers. “After all, the Fed’s first rate cut could happen later this year, and the probability of a rate cut this June is inching closer to coin-flip probability.”
A report will be released later this week showing that employment continued to increase in March, even as wage growth slowed. Federal Reserve Chairman Jerome Powell, who is scheduled to speak on Wednesday, said Friday that officials were waiting for further evidence that prices are under control.
The yen was firm in early trading Tuesday after falling towards 152 yen to the dollar on Monday. The decline raised the risk that Japanese authorities would intervene in the market.
BMO Capital Markets’ Ian Lingen and Beil Hartman say the market seems “comfortable” with pointing to manufacturing sell-offs as a trigger for U.S. Treasuries, but the market has already moved ahead of the headlines. Bond sales were reportedly underway.
“Monday’s futures market price action suggests that the pendulum of US interest rate sentiment may be shifting in a hawkish direction, but it goes without saying that expectations will become more meaningful as more data emerges. “There is plenty of room for change,” they noted.
The Institute for Supply Management’s manufacturing index rose to 50.3 last month. Although the index was barely above the 50 mark, which is the dividing line between expansion and contraction, the 16th consecutive month of contraction in economic activity was halted. At the same time, the group’s price paid indicator rose to 55.8, the highest since July 2022.
Perhaps the “most troubling” thing is the rising prices paid, said Michael Scholl of Marketfield Asset Management. “This shows that some of the ‘temporary’ relief from reflationary forces is starting to reverse.”
In Asia, data released on Tuesday will include South Korea’s inflation statistics, India’s PMI and Reserve Bank of Australia minutes. Australia’s central bank will switch to a new system for implementing monetary policy as passive quantitative tightening leads to a decline in foreign exchange reserves in the banking system, Australian central bank assistant governor Christopher Kent said on Tuesday.
Investors are also keeping a keen eye on Chinese stocks after the mainland CSI300 index posted its biggest gain in a month on Monday on hopes of renewed vitality in the world’s second-largest economy. Dew.
US stocks
A bullish call option on the S&P 500 that expires in one year and has a 25% probability of being in the money (known as the 25 delta) will increase in cost, while an equivalent bearish put will have a lower cost. In other words, investors are prepared for continued gains in the broader market and are not particularly concerned about small declines.
Stock trading is likely to become even more volatile after an incredibly strong run and almost fear baked into prices, according to Wolf Research’s Chris Seniek.
“Historically, overvaluation alone has not been a cause for immediate concern,” the Goldman Sachs Group team led by Ryan Hammond said in a note to clients last week. “The period of overvaluation often lasts close to a year, and is usually not a problem if the subsequent economic growth environment is healthy.”
This week’s main events:
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Eurozone S&P Global Manufacturing PMI, Tuesday
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US factory orders, light vehicle sales, JOLTS job openings, Tuesday
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Fed’s John Williams, Loretta Mester, Mary Daly and Michelle Bowman speak on Tuesday
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St. Louis Fed President Alberto Moussallem will be sworn in on Tuesday. He replaces James Bullard.
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China Caixin releases PMI on Wednesday
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Eurozone CPI, unemployment rate, Wednesday
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Japanese services PMI, Wednesday
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US ADP Employment, ISM Services, Wednesday
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Federal Reserve Chairman Jerome Powell speaks on Wednesday
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Fed’s Austan Goolsby, Adrianna Kugler and Michelle Bowman will also speak Wednesday.
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Eurozone S&P Global Services PMI, PPI, Thursday
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U.S. new jobless claims, Challenger layoffs, Thursday
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Fed’s Loretta Mester, Albert Moussallem, Thomas Barkin, Patrick Harker and Austan Goolsby speak Thursday
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European Central Bank releases report on March interest rate decisions on Thursday
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Eurozone retail sales Friday
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U.S. unemployment rate, nonfarm payrolls, Friday
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Fed’s Michelle Bowman, Thomas Barkin and Laurie Logan speak on Friday
Some of the major developments in the market include:
stock
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S&P 500 futures were little changed as of 8:26 a.m. Tokyo time.
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Nasdaq 100 futures little changed
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Nikkei 225 futures rose 0.2%
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Australia’s S&P/ASX 200 rose 0.2%
currency
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Bloomberg Dollar Spot Index little changed
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The euro was almost unchanged at $1.0737.
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The Japanese yen remained unchanged at 151.65 yen to the dollar.
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The offshore yuan was little changed at 7.2606 yuan to the dollar.
cryptocurrency
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Bitcoin is little changed at $69,836.59
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Ether rose 0.4% to $3,510.64
bond
merchandise
This article was produced in partnership with Bloomberg Automation.
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