Stocks rise, dollar falls ahead of inflation data: markets mixed

(Bloomberg) — Asian stocks rose, heading for a second day of gains on Tuesday, as the dollar fell on a series of inflation prints that are expected to influence the direction of global monetary policy.

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The MSCI AC Asia Pacific Index rose, with Hong Kong stocks leading the gains. US and European stock futures remained firm. The Bloomberg Dollar Index fell for a third day, falling against all of its Group of 10 peers as investors mull the prospects of U.S. interest rate cuts. Australia’s currency outperformed. The 10-year Treasury yield remained stable.

“The bullish risk tone weighed on the US dollar and supported the Australian dollar,” wrote Peter Dragicevich, APAC currency strategist at Corpay, in a note. “If we are correct in our assessment that the US core PCE deflator moderates, China’s PMI improves and/or statistical peculiarities cause euro zone inflation to accelerate again, we believe the dollar could lose ground by the end of the week.”

Chinese property stocks rose after Shanghai lowered down payment ratios and mortgage minimums, as China’s biggest cities followed through with central government aid to the property sector. Technology stocks in China rose as China’s top state banks said they will invest a combined total of 114 billion yuan ($15.7 billion) in a semiconductor investment fund.

Traders will this week study new inflation data from Australia to Japan, the eurozone and the US. Bank of Japan Governor Kazuo Ueda and his deputy have indicated that there is scope to gradually raise interest rates now that the country has moved away from a 0% inflation norm. Japan’s April producer prices beat estimates, jumping 2.8% from a year earlier.

“Things will improve tonight when the US opens, and then I suspect the next few days, all else being equal, will be driven by month-end flows and then the crucial PCE Index release,” he said. Kyle Rodda, a senior market analyst at Capital.Com Inc. “All we’re seeing are the usual tidal currents in the market where there’s not much going on and no one is really around.”

The Federal Reserve’s favored measure of underlying inflation is expected to show modest easing when it arrives on Friday. Chairman Jerome Powell emphasized the need for more evidence that inflation is on track for the 2% target before easing policy. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers speaking this week.

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In commodities, gold stabilized. Oil advanced as the focus shifted to an OPEC+ supply meeting on Sunday and U.S. demand at the start of the summer season. Copper has resumed its rally as China steps up efforts to rescue its housing market and as the dollar weakens. Wheat briefly hit its highest level in more than nine months on concerns about dwindling supplies. Palm oil rose to its highest value since late April on expectations that shipments from major Southeast Asian producers will increase to meet renewed demand from major buyers.

The ECB should not rule out lowering borrowing costs at its June and July meetings, Governing Council member François Villeroy de Galhau said, reacting to fellow monetary officials who are uncomfortable with the idea of ​​consecutive cuts. Chief economist Philip Lane told the Financial Times that the central bank will have to maintain restrictive policy until 2024, even with the prospect of an interest rate cut next month.

While an ECB rate cut in June was widely telegraphed, subsequent measures are less clear given uncertainty over wage growth and factors such as fighting in the Middle East. This week’s data may show that overall inflation in the eurozone rose in May.

Read more: About the ‘T+1’ Rule That Causes US Stocks to Liquidate in One Day: QuickTake

The “T+1” rule, which has the potential to cause problems for foreign investors, comes into effect when investors return from the long weekend – causing US stocks to sell off in one day instead of two.

Some important events this week:

• The IMF holds discussions with Ukrainian authorities to review economic policies as the country seeks to unlock the next tranche of $2.2 billion in aid, Monday

• Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and Governing Council Member Klaas Knot speak at the Barclays-CEPR International Monetary Policy Forum, Tuesday

• South African elections, the most significant since the end of apartheid, Wednesday

• Fed releases Beige Book economic survey, Wednesday

• South African Rate Decision, US Initial Jobless Claims, GDP, Wholesale Inventories, Thursday

• New York Fed President John Williams speaks at the New York Economic Club, Thursday

• GDP data published for Canada, eurozone, Türkiye, Friday

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were up 0.2% at 1:40 p.m. Tokyo time

• Nasdaq 100 futures rose 0.3%

• Japan’s Topix has changed little

• Australia’s S&P/ASX 200 fell 0.2%

• Hong Kong’s Hang Seng rose 0.6%

• The Shanghai Compound has changed little

• Euro Stoxx 50 futures rose 0.3%

Coins

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.2% to $1.0880

• The Japanese yen rose 0.1% to 156.69 per dollar

• The offshore yuan was little changed at 7.2577 per dollar

Cryptocurrencies

• Bitcoin fell 2.7% to $67,726.88

• Ether fell 1.3% to $3,837.44

Titles

• The 10-year Treasury yield was little changed at 4.46%

• Japan’s 10-year yield rose one basis point to 1.035%

• Australia’s 10-year yield little changed at 4.27%

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This story was produced with help from Bloomberg Automation.

–With assistance from Hooyeon Kim and Ruth Carson.

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