Asian Stocks Open Lower in Week of Rate Decisions: Markets Wrap

(Bloomberg) — The dollar edged higher and stocks declined in Asia at the start of a pivotal week for markets, with interest rate decisions due from the Federal Reserve, the European Central Bank and a host of their peers.

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The greenback made gains against the yen, the euro and the offshore yuan in early trading. Shares fell in Japan, South Korea and Australia and equity futures indicated a likely drop to come for Hong Kong.

A late-day slide in US stocks on Friday shattered the calm that prevailed throughout most of the trading session, with the S&P 500 closing near the day’s lows. The Dow Jones Industrial Average notched its worst weekly drop since September. US stock futures fell in Asia on Monday.

The Treasury 10-year yield was little changed after a jump on Friday that took it to just below 3.6%. Yields for government bonds in Australia and New Zealand rose,

Recession fears have resurfaced ahead of the Fed decision Wednesday, when policymakers are expected to downshift to a 50 basis points hike. Yet officials including Chair Jerome Powell have also stressed that borrowing costs will need to remain restrictive for some time, putting them at odds with some investors looking for rate cuts later in 2023.

The ECB follows on Thursday, with consensus estimates for it to also deliver a 50 basis points hike. Markets also have to contend with decisions this week from the Bank of England and monetary authorities in Mexico, Norway, the Philippines, Switzerland and Taiwan.

Read: The 24 Hours of Hikes That End Year of Fighting Inflation

While the tumult of this year has a gauge of global stocks headed for its biggest annual loss since 2008, the world’s biggest investors predict that stocks will see low double-digit gains in 2023. Seventy one percent of respondents in a Bloomberg News survey expect equities to rise, versus 19% forecasting declines. For those seeing gains, the average response was a 10% return.

The world’s top fund managers are also mostly bullish on Chinese stocks for 2023. About 60% of respondents in a Bloomberg News survey recommended buying the country’s stocks, while 31% said they are a sell.

More immediately this week though, all eyes will be on Tuesday’s US consumer inflation data in the run-up to the Fed meeting. It’s forecast that prices, while much too high, continued to decelerate.

“Should we see US core CPI above 6.3%, then the US dollar should rally hard, and equity should find decent sellers,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. “Conversely, a read below 6% would be a surprise and the US dollar bears should find comfort in that.”

Elsewhere, oil climbed, rebounding after the biggest weekly loss since April. Gold was slightly down.

Key events this week:

US CPI, Tuesday

FOMC rate decision and Fed Chair news conference, Wednesday
China medium-term lending, property investment, retail sales, industrial production, surveyed jobless, Thursday
ECB rate decision and ECB President Lagarde briefing, Thursday

Rate decisions for UK BOE, Mexico, Norway, Philippines, Switzerland, Taiwan, Thursday
US cross-border investment, business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
Eurozone S&P Global PMI, CPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 9:06 a.m. Tokyo time. The S&P 500 fell 0.7% Friday
Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.6% on Friday

Japan’s Topix index fell 0.3%
South Korea’s Kospi index fell 0.5%
Australia’s S&P/ASX 200 Index fell 0.7%

Hong Kong’s Hang Seng futures fell 1.2%

Currencies

The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.2% to $1.0519
The Japanese yen fell 0.2% to 136.77 per dollar

The offshore yuan was little changed at 6.9695 per dollar

Cryptocurrencies

Bitcoin fell 0.5% to $17,028.54
Ether fell 0.4% to $1,260.31

Bonds

Commodities

West Texas Intermediate crude rose 1.2% to $71.89 a barrel
Spot gold fell 0.2% to $1,793.77 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth.