Asian stocks mixed on Fed warning, China hopes

  • The Fed’s Waller plays down the CPI as just one number
  • Beijing issues property support, COVID measures
  • Biden met with Xi at the G20 meeting

SYDNEY, Nov 14 (Reuters) – Asian stock markets were mixed on Monday as a top US central banker warned investors against getting carried away by one inflation figure, while Chinese shares gained in a sign of relief for the hard-hit property sector.

A modest miss on US inflation was enough to see two-year Treasury yields dive 33 basis points for the week and the dollar lost almost 4%, the fourth largest weekly decline since the period of free floating exchange rates began over 50 years ago.

However, the resulting easing in the US financial situation was not completely welcomed by the Federal Reserve with Governor Christopher Waller saying it would take a string of soft reports for the bank to take its foot off the brakes. read more

Waller added that the markets are doing better in just one print of inflation, although he acknowledged that the Fed may now start thinking about hiking at a slower pace.

Futures are betting heavily on a half-point rate hike to 4.25-4.5% in December and then several quarter-point moves to peak in the 4.75-5.0% range.

The two-year yield edged up to 4.41%, after diving as deep as 4.29% on Friday.

“The CPI downside surprise aligns with a wide range of indicators leading to a downshift in global inflation that should encourage moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan.

“This positive message needs to be tempered by the recognition that the downshift in inflation will be too little for the central bank to declare mission-achieved, and more tightening is possible on the way.”

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.8%, after jumping 7.7% last week.

Nikkei Japan (.N225) facilitate 0.6%, while South Korea (.KS11) go flat. S&P 500 futures dipped 0.3% and Nasdaq futures lost 0.4%.

EUROSTOXX 50 futures gained 0.4%, while FTSE futures tacked on 0.1%.


Dealers are also waiting to see if Chinese stocks can extend their big rally amid reports that regulators have asked financial institutions to extend more support to stressed property developers. read more

China’s real estate index (.CSI000952) jumped 5% in response. Blue chips (.CSI300) the 1.4% rise was helped by many changes to China’s COVID curve, even as the country reported more cases over the weekend. read more

“It is difficult to see how the news of the case is anything but negative from an economic point of view, but it is symbolic of a movement, however small, in the zero COVID strategy that the market is happy to replace,” said Ray Attrill, head of FX strategy. at NAB.

US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions high on the agenda. read more

News of the COVID rules has led to a short-covering bounce in the yuan last week, which added relief pressure to the dollar as yields fell. The dollar regained a little ground early Monday as the index added 0.4% to 106,870, but remained short of last week’s 111,280 high.

The euro eased the touch to $1.0324, after climbing 3.9% last week, while the dollar firmed to 139.27 yen below last week’s 5.4% drubbing.

The dollar lost almost as much as the Swiss franc, steered in part by warnings from the Swiss National Bank that it will use rates and currency purchases to tame inflation. read more

Sterling eased back to $1.1790 ahead of the UK Chancellor’s Autumn Statement on Thursday where he is expected to set out tax rises and spending cuts. read more

Crypto currencies remain under pressure as at least $1 billion of customer funds are reported to be missing from the collapsed crypto exchange FTX. read more

Bitcoin was trading down 1.5% at $16,055, after shedding nearly 22% last week.

The dollar’s recent retreat provided a much-needed fillip for commodities, with gold holding at $1,763 an ounce after jumping over $100 last week.

Oil futures extended their gains in hopes of picking up Chinese demand and Brent up 63 cents at $96.62, while US crude rose 56 cents to $89.52 per barrel.

Reporting by Wayne Cole; Edited by Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

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