Asia Stocks to Slip as Traders Mull Policy Outlook: Markets Wrap

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Asia Stocks to Slip as Traders Mull Policy Outlook: Markets Wrap

Sunil Jagtiani
·3 min read

(Bloomberg) -- Asian stocks looked set to dip Thursday after U.S. shares moved in narrow ranges as traders digested commentary from Federal Reserve officials on the outlook for stimulus. Treasuries retreated.

Equity futures fell in Japan and Australia and were little changed in Hong Kong. In the U.S., firms that benefit from economic reopening -- such as retailers and financials -- outperformed but overall the S&P 500 edged lower. A rally in Tesla Inc. helped the Nasdaq Composite eke out a record. U.S. stock futures inched up.

Dallas Fed President Robert Kaplan, who’s penciled in a rate hike next year, said the economy will likely meet the Fed’s threshold for tapering asset purchases sooner than people think. His Atlanta counterpart Raphael Bostic said the central bank could decide to slow such purchases in the next few months.

The dollar was little changed, while the yen held a slump in part as the rebound from the pandemic dents the allure of haven currencies. The China open will be in the spotlight after a report that the U.S. is poised to bar some solar products made in the Xinjiang region over alleged human rights abuses.

Fed officials have sought to provide reassurance that loose monetary policy remains in place to support economic expansion while also flagging gradual tightening is on the cards in the months ahead if inflation and employment goals are met. That’s stirred a debate on the outlook for markets, especially bets tied to accelerating growth that dominated investor thinking this year.

“You’ve got this inflation issue that has captured the imagination of investors for the first time in a long time,” said David Donabedian, chief investment officer of CIBC Private Wealth Management, adding he doesn’t “have a great case for why the market takes another leap forward here over the summer.”

Data Wednesday showed U.S. manufacturing activity expanded in June at the fastest pace in records dating back to 2007. Factories are grappling with supplier delays, record growth in input costs and hiring difficulties.

Meanwhile, Treasury Secretary Janet Yellen said her department may exhaust emergency measures to avoid breaching the U.S. debt limit as soon as August unless Congress acts to avert a potential default that would be “catastrophic.”

Elsewhere, crude oil held above $73 a barrel. Bitcoin traded at around $33,400, steadying after a slide earlier in the week.

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

Bank of England interest rate decision ThursdayThe Fed releases Thursday the results of stress tests on the largest U.S. banksU.S. wholesale inventories, initial jobless claims, GDP, durable goods due ThursdayU.S. personal income/spending, University of Michigan sentiment on Friday

These are some of the main moves in financial markets:

Stocks

S&P 500 futures rose 0.1% as of 7:50 a.m. in Tokyo. The index fell 0.1%Nasdaq 100 futures climbed 0.1%. The gauge was little changedNikkei 225 futures slipped 0.1%S&P/ASX 200 futures retreated 0.4%Hang Seng futures fell 0.1%

Currencies

The Bloomberg Dollar Spot Index fell less than 0.1%The euro was at $1.1931The Japanese yen was at 110.96 per dollar after falling 0.3%The offshore yuan was at 6.4779 per dollar

Bonds

The yield on 10-year Treasuries rose two basis points to 1.49%

Commodities

West Texas Intermediate crude added 0.3% to $73.28 a barrelGold was at $1,779.75 an ounce

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