Asia Eyes Steady Open After Powell, China Data Due: Markets Wrap

(Bloomberg) -- Asian stocks look set for a steady start Thursday after Federal Reserve Chair Jerome Powell signaled more U.S. economic progress is needed before stimulus can be pared back and as traders await China growth data.

Futures inched lower in Japan and Australia and were steady in Hong Kong. U.S. contracts fluctuated following modest S&P 500 and Nasdaq 100 gains on Powell’s reassurance on accommodative policy and reiteration that high inflation will likely moderate in coming months. Treasuries rallied and the dollar held a retreat.

A raft of key Chinese reports are due later, including gross domestic product growth, amid a debate on whether the Asian nation’s economic rebound from the pandemic is peaking. An upcoming maturity of policy loans will offer clues on how far China’s central bank will go in loosening policy.

Just when the Fed might start tapering $120 billion in monthly bond purchases, and the spread of the more contagious delta Covid-19 variant, are among key variables for investors with global stocks near all-time highs. The China data will offer clues on whether momentum there is slowing, requiring new policy support, after the world’s second-largest economy led the rebound from the pandemic.

“FOMC chair Jay Powell provided a more dovish than anticipated testimony to Congress,” Kim Mundy, a strategist at the Commonwealth Bank of Australia, wrote in a note. “We continue to expect the FOMC will announce its intention to begin tapering its asset purchases in the September meeting and start tapering in October.”

Powell also stressed that while officials expect high inflation to be temporary, they would react if inflation turned out to be persistently and materially above their 2% target. The latest economic data showed U.S. producer prices surged in June, exceeding estimates, adding to signs of rising costs as the economy reopens.

Meanwhile, the U.S. said it has no plans to revive a regular economic dialogue with China suspended under the Trump administration, as tension between Beijing and Washington continues to bubble.

Oil tumbled amid building U.S. fuel inventories and a potential OPEC+ agreement to increase supply. Gold was around a four-week high, aided by inflation concerns and Powell’s comments on stimulus.

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Here are some events to watch this week:

• Bank of Korea monetary decision Thursday
• Bank of Japan interest rate decision Friday

These are some of the main moves in financial markets:

Stocks

• S&P 500 contracts were steady as of 8:12 a.m. in Tokyo. The S&P 500 rose 0.1%
• Nasdaq 100 contracts added 0.1%. The Nasdaq 100 rose 0.2%
• Nikkei 225 futures were little changed
• Australia’s S&P/ASX 200 futures fell 0.1%
• Hang Seng Index futures were little changed

Currencies

• The Japanese yen traded at 109.99 per dollar
• The offshore yuan was at 6.4609 per dollar
• The Bloomberg Dollar Spot Index was steady
• The euro was at $1.1836

Bonds

• The yield on 10-year Treasuries declined seven basis points to 1.35%
• Australia’s 10-year bond yield fell five basis points to 1.29%

Commodities

• West Texas Intermediate crude was at $72.74 a barrel, down 0.5%
• Gold was at $1,826.86 an ounce

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