Asian Stocks Set to Track U.S. Gains; Dollar Drops: Markets Wrap

Asian Stocks Set to Track U.S. Gains; Dollar Drops: Markets Wrap
Andreea Papuc
·4 min read

(Bloomberg) -- Asian stocks are set to track a U.S. rally as a focus on corporate earnings helps to ease some of the concerns over inflationary pressures in the global economy. A gauge of the dollar held a retreat.

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Futures advanced in Japan and Hong Kong. Australian shares edged up at the open, while U.S. contracts were steady. The S&P 500 is close to a record as traders digest company reports to assess the impact of supply-chain snarls and higher commodity prices. Johnson & Johnson raised a profit forecast, Netflix Inc. subscribers jumped and Procter & Gamble Co. faced rising raw material and freight costs.

The 10-year U.S. Treasury yield pushed above 1.6% and the yield curve steepened. The dollar held losses amid bets that other central banks will boost interest rates before the Federal Reserve. The offshore yuan was steady after jumping.

Bitcoin is close to scaling the peak it reached in April. The first Bitcoin-linked exchange-traded fund listed in the U.S. debuted as the second-most heavily traded fund on record in a watershed moment for the cryptocurrency industry.

The earnings season has taken the edge off concerns about slowing growth, price pressures stoked by an energy crisis and the prospect of reduced central bank support. The Cboe Volatility Index has fallen back to the lowest level since August.

“This earnings season could be highly important for investors, as inflation, labor, supply, and currency risks settle in,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “We will be particularly attuned to companies’ guidance on the path ahead and whether higher costs could reduce corporate margins.”

In the latest Fed comments, Governor Christopher Waller said the central bank should begin tapering its bond-buying program next month, though interest-rate increases are probably “still some time off.” He added the caveat that “if my upside risk for inflation comes to pass, with inflation considerably above 2% well into 2022, then I will favor liftoff sooner than I now anticipate.”

“I don’t think the Fed is going to act or hike very aggressively in part because they have this inflation view, but also because we are going to be in a slowing growth environment by the end of next year,” Esty Dwek, FlowBank SA chief investment officer, said on Bloomberg Television.

The focus in China remains on Beijing’s regulatory curbs and the slowdown in the property sector amid the debt woes at China Evergrande Group. China sold a U.S. dollar bond in Hong Kong for the fifth straight year.

Elsewhere, crude oil traded around $83 a barrel in New York and Brent closed above $85 a barrel for the first time since October 2018. Russia signaled it may not give Europe extra natural gas without approval for the Nord Stream 2 pipeline.

For more market analysis, read our MLIV blog.

Events to watch this week:

  • Earnings roll in, including from AT&T Inc., Barclays Plc and Tesla Inc.

  • EIA crude oil inventory report, Wednesday

  • China property prices, loan prime rates, Wednesday

  • U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday

  • Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 8:03 a.m. in Tokyo. The S&P 500 rose 0.7%

  • Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.7%

  • Nikkei 225 futures rose 0.2%

  • Australia’s S&P/ASX 200 Index added 0.2%

  • Hang Seng Index futures gained 0.9%

Currencies

  • The Japanese yen was little changed at 114.39 per dollar

  • The offshore yuan was at 6.3770 per dollar

  • The Bloomberg Dollar Spot Index was little changed

  • The euro traded at $1.1635

Bonds

  • The yield on 10-year Treasuries advanced four basis points to 1.64%

  • Australia’s 10-year bond yield climbed five basis points to 1.77%

Commodities

  • West Texas Intermediate crude rose 0.1% to $83 a barrel

  • Gold was at $1,769.22 an ounce

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