By Wayne Cole
SYDNEY, Nov 14 (Reuters) – Asian stock markets took a breather on Monday after last week’s sweeping rally as the top US central banker warned investors against getting carried away by one-digit inflation, nudging up bond yields and the dollar.
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.
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 0#FF: who are betting heavily on a half-point rate hike to 4.25-4.5% in December and then a few quarter-point moves to the top in the 4.75-5.0% range. FEDWATCH
“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 0.2%, after jumping 7.7% last week.
Nikkei Japan .N225 it is flat, while South Korea .KS11 firmed 0.3%. S&P 500 futures sc1 dipped 0.2%, while Nasdaq futures NQc1 lost 0.3%.
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.
Blue chips .CSI300 Friday’s rise was helped by many changes to China’s COVID curve, even as the country reported more cases over the weekend.
“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.
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 on Monday as the index added 0.4% to 106,870 = USDbut still short of last week’s 111,280 high.
The euro eased to touch $1.0324 EUR = EBSafter climbing 3.9% last week, while the dollar firmed to 139.77 yen JPY = EBS down from last week’s 5.4% drubbing.
The dollar lost almost as much as the Swiss franc CHF =steered in part by warnings from the Swiss National Bank that it will use rates and currency purchases to tame inflation.
Sterling eased back to $1.1790 GBP=D3 ahead of the UK Chancellor’s Autumn Statement on Thursday where he is expected to set out tax rises and spending cuts.
Crypto currencies remain under pressure as at least $1 billion of customer funds are reported to be missing from the collapsed crypto exchange FTX.
Bitcoin traded down 2.4% at $16,386 BTC = BTCafter shedding almost 22% last week.
The dollar’s recent retreat provided a much-needed fillip for commodities, with gold up at $1,768 per ounce XAU = after jumping over $100 last week. GOAL/
Oil futures extended their gains with Brent LCOc1 up 86 cents at $96.85, while crude US CLc1 rose 80 cents to $89.76 per barrel. O/R
Asian stock markethttps://tmsnrt.rs/2zpUAr4
(Reporting by Wayne Cole; Editing by Shri Navaratnam)
The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.