(Bloomberg) – Asian stocks rose following their worst sell-off in two weeks after US equities rebounded as investors weigh the prospect of large interest rate hikes by the Federal Reserve. The dollar was little changed.
Benchmarks in Japan and Australia climbed. Shares advanced in Hong Kong as Chinese developers rallied amid reports of increased efforts by officials to arrest a housing slump. US futures climbed after the S&P 500 closed in the green thanks to dip buyers late in the session.
Traders remain focused on US economic data, with a decline in producer prices there providing some relief after the jolt from consumer-price figures saw wagers for rate increases ratchet higher. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.
“I think you want to begin to add risk back into your portfolio,” Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments said on Bloomberg TV. “I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation.”
Swaps traders are pricing in a hike of three-quarters of a percentage point when the Fed meets next week, with some wagers appearing for a full-point move. The rise in rate-sensitive Treasuries on Wednesday deepened the curve inversion – a harbinger for a looming recession – to a level unseen this century.
Read More: US 2- to 30-Year Curve Reaches Most Inverted Level This Century
While the magnitude of the stock rout was impressive following hot US inflation data, the S&P 500 only reversed most of the gains made in the previous four sessions. The lack of a surge in the VIX index – known as the “fear gauge” – suggests that the selloff was a recalibration of those expectations rather than panic selling.
Asian currencies remain at risk from a strong greenback. The yen held around 143 per dollar, having rallied from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
The offshore yuan was close to the 7 level versus the dollar after the central bank drained liquidity from the banking system for a second straight month while leaving rates unchanged as it sought to ease pressure on the currency.
Crude oil fluctuated amid optimism for demand with China easing Covid restrictions in the megacity of Chengdu. Natural gas futures surged the most among major US-traded commodities as hot weather forecasts and a looming rail strike added to concern about tight supplies ahead of winter.
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Here are some key events to watch this week:
- US business inventories, empire manufacturing, retail sales, initial jobless claims, industrial production, Thursday
- China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
- Euro area CPI, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures contracts rose 0.1% as of 12:39 pm in Tokyo. The underlying gauge rose 0.3% on Wednesday
- Nasdaq 100 futures rose 0.1% after a gain of 0.8% for the index
- Australia’s S & P / ASX 200 rose 0.5%
- Japan’s Topix gained 0.2%
- Hang Seng Index rose 0.6%
- Shanghai Composite Index slipped 1%
- Kospi index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little change. It fell 0.2% on Wednesday
- The euro traded at $ 0.9975
- The yen fell 0.2% to 143.40 per dollar
- The offshore yuan traded at 6.9728 versus the dollar
Bonds
- The yield on 10-year Treasuries rose two basis points at 3.42%
- The yield on 10-year Australian debt gained one basis point to 3.64%
Commodities
- West Texas Intermediate crude traded at $ 88.50 a barrel
- Gold was at $ 1,692.76 an ounce
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