Stocks in Asia got a lift from Japan on Friday while Treasuries were mixed as investors evaluated how far the Federal Reserve must jack up interest rates to ensure high inflation keeps cooling. Japan added about 2% in a catch-up rally as the equity market there reopened from a holiday but Australia and Hong Kong struggled. US futures fluctuated after the S&P 500 and Nasdaq 100 gave up intraday gains to end in the red. Shorter maturity Treasury yields edged up. The 30-year note pared a Thursday drop sparked by middling demand at an auction. A dollar gauge was steady.
In the latest US central banker comments, San Francisco Fed President Mary Daly said inflation is too high, adding she anticipates more restrictive monetary policy in 2023. She said her baseline is a half-point September hike but that she’s open to 75 basis points if necessary. She was speaking on Bloomberg Television in the wake of a report showing that US producer prices fell in July from a month earlier for the first time in over two years, adding to signs of cooling but still troubling inflation.
Stocks this week have cheered the possibility that ebbing price pressures will take the pressure off the Fed to keep hiking rates sharply, making a soft economic landing more likely. Global shares are set for the longest streak of weekly gains since 2021, paring their retreat this year to about 14%. The bond market seems more skeptical — an ongoing Treasury yield curve inversion hints at concerns that only a recession can curb the cost of living.
“There are going to be headwinds for the markets until we get some resolution on how far the Fed is going to go and how long they’re going to raise interest rates,” Terri Jacobsen, a managing director in wealth management at UBS Financial Services Inc., said on Bloomberg Television. Swaps referencing the Fed’s September meeting point to some uncertainty over whether a half-point or another 75 basis-point rate hike is on the cards.
Elsewhere, oil hovered around $94 a barrel and both Bitcoin and gold wavered.
What to watch this week
Euro-area industrial production, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets
S&P 500 futures rose 0.1% as of 9:26 a.m. in Tokyo. The S&P 500 fell 0.1%
Nasdaq 100 futures climbed 0.2%. The Nasdaq 100 retreated 0.7%
Japan’s Topix index added 1.9%
South Korea’s Kospi index lost 0.1%
Australia’s S&P/ASX 200 index shed 0.5%
Euro Stoxx 50 futures decreased 0.1%
The Bloomberg Dollar Spot Index was little changed
The euro was at $1.0311, down 0.1%
The Japanese yen was at 133.27 per dollar, down 0.2%
The offshore yuan was at 6.7430 per dollar
The yield on 10-year Treasuries was at 2.89%
Australia’s 10-year yield added 14 basis points to reach 3.43%
West Texas Intermediate crude was at $94.01 a barrel, down 0.4%
Gold was at $1,787.64 an ounce, down 0.1%