(Bloomberg) -- Asian stocks fell on Wednesday ahead of a critical inflation report and as the US debt ceiling impasse damps investor sentiment.

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An equity benchmark for the region was down about 0.5%, putting it on course for the biggest loss in more than two weeks. Contracts for the S&P 500 and Nasdaq 100 were fractionally higher in Asia after the indexes fell 0.5% and 0.7%, respectively, on Tuesday.

The US gauges have been stuck in narrow trading ranges as investors weigh the potential end of the Federal Reserve’s interest rate hikes against the possibility of an economic slowdown. It’s a similar story for shares globally, which have largely moved sideways for more than a month, as measured by the MSCI World Index.

The dollar weakened marginally versus all of its Group-of-10 peers. The Australian currency was held a tiny gain following a 0.3% drop Tuesday, when the government flagged a budget surplus that may help ease inflation. Bond yields ticked higher in Australia.

Treasury yields steadied following muted reaction in the futures market after President Joe Biden and congressional Republicans made little tangible progress toward averting a first-ever US default. They pledged negotiations on spending that would open the door to a possible agreement, with Biden and House Speaker Kevin McCarthy to meet again on Friday.

“I don’t think there is likely to be any market reaction until will get closer to the X-date — that is still a moving target, likely into June and quite possibly later into July,” said Jason Wong, currency strategist at Bank of New Zealand Ltd. “Meanwhile, headlines around negotiations are more noise than signal and mostly market-neutral.”

While impact of the debt talks has been relatively mild Wednesday, it casts a long shadow over markets. Some of Wall Street’s most experienced traders have warned of “unthinkable” long-term damage of a US default.

Yields on Treasury bills for early June led a rise among rates on short-term securities as both Biden and McCarthy disavowed a short-term extension of the debt limit. The Treasury has also cut the size of four- and eight-week auctions as it reduces sale sizes for these kinds of securities amid the impasse.

The US inflation report to come later Wednesday is also an area of concern for the market. It’s expected to show headline CPI rose by 5% in April on a year-on-year basis, indicating that price pressures are still uncomfortably high for the Fed. This will be followed on Thursday by consumer and producer price data from China, which is forecast to show easing inflation pressure in the Asian powerhouse.

Fed officials, including New York chief John Williams, are watching for signs of a credit crunch. Williams said he wasn’t including a rate cut in his forecast for this year at an event Tuesday. He left the door open on the odds of a Fed pause. Swaps suggest traders are expecting at least 50 basis points in cuts by the end of 2023.

Still, some investors aren’t about to change their investment strategies on the basis of developments this week.

There will be another inflation report and payrolls figures before the next Fed rate decision in mid June, Chetan Seth, an equity strategist at Nomura Holdings Inc., noted on Bloomberg Television. “I don’t think there’s any temptation from our side to really stick out our necks and say, ‘Hey, you know what, this really changes the picture’,” he said.

Elsewhere in markets, oil held most of its recent rally after the Biden administration announced plans to replenish strategic reserves. Gold fluctuated and Bitcoin traded below $28,000.

Key events this week:

• US CPI, Wednesday

• China PPI, CPI, Thursday

• UK BOE rate decision, industrial production, GDP, Thursday

• US PPI, initial jobless claims, Thursday

• Group of Seven finance minister and central bank governors meet in Japan, Thursday

• US University of Michigan consumer sentiment, Friday

• Fed Governor Philip Jefferson and St. Louis Fed President James Bullard participate in panel discussion on monetary policy at Stanford University, Friday.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 10:46 a.m. Tokyo time. The S&P 500 fell 0.5% Tuesday

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

• Japan’s Topix index fell 0.4%

• Hong Kong’s Hang Seng Index fell 0.7%

• China’s Shanghai Composite Index fell 0.6%

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

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0971

• The Japanese yen was little changed at 135.17 per dollar

• The offshore yuan was little changed at 6.9289 per dollar

• The Australian dollar was little changed at $0.6765

Cryptocurrencies

• Bitcoin rose 0.1% to $27,700.1

• Ether was little changed at $1,850.55

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.51%

• Japan’s 10-year yield declined 0.5 basis point to 0.415%

• Australia’s 10-year yield advanced one basis point to 3.46%

Commodities

• West Texas Intermediate crude fell 0.4% to $73.43 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Peyton Forte, Cristin Flanagan and Ruth Carson.

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