Asian stock markets struggled for momentum as China's rally paused and expectations grew that a Bank of Japan rate hike was imminent following a series of strong wage increases in Tokyo.
Stock prices in mainland China fell as Country Garden Holdings' unpaid bond payments weighed on developers. The Hang Seng China Enterprise Index has risen from recent lows, rising nearly 20%. U.S. and European stock contracts were little changed after the record session.
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Japanese stocks fell while the yen rose slightly as many companies, including Toyota Motor Corporation, agreed to raise wages, increasing signs of a sustainable wage and price cycle. Investors will be watching this week's union dues agreement to determine whether price pressures are strong enough for the Bank of Japan to raise interest rates next week.
Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank, said in response to the report on Toyota, “Expectations for a revision in the Bank of Japan's policy have increased, leading to a stronger yen and a decline in overall stock prices.'' He added that the overall spring wage negotiations are likely to be affected, and that it is “unlikely to see any further news that would depress the market.”
The 10-year Treasury yield fell 1 basis point after rising on the sale of $39 billion in 10-year bonds. Bloomberg's dollar gauge was little changed after rising in the first session of March.
Traders maintained the Federal Reserve's interest rate cuts this year, even though U.S. inflation was higher than expected. The relative calm in the face of strong stock prices was unusual and a sharp contrast to how stocks have traded on CPI days since the Fed began raising interest rates.
Since March 2022, there have been only a handful of times when the S&P 500 index rose more than 1% on the day of the CPI release. But in most cases, the increase was due to a decline in core inflation, not an increase in core inflation.
The Fed is widely expected to keep interest rates unchanged for the fifth consecutive time at its policymakers' meeting on March 19-20. Much of the attention from investors will be on the Federal Open Market Committee's quarterly interest rate forecast, including whether new jobs and inflation data have caused any changes.
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In the corporate world, Cathay Pacific Airways has finally shaken off the lingering effects of the pandemic and reported record operating profits. China Vanke is in talks with banks about a debt swap to help the cash-strapped developer avoid its first-ever bond default, people familiar with the matter said.
Elsewhere, oil prices rose after four days of declines after an industry report pointed to a decline in U.S. crude inventories, offsetting swinging production cuts from the Organization of the Petroleum Exporting Countries (OPEC). Gold prices ended their record rally and continued to fall as inflation rose faster than expected in the US.
This week's main events:
- Eurozone industrial production, Wednesday
- ECB Executive Board member Giannis Stournaras speaks on Wednesday
- Volkswagen, Adidas financial results, Wednesday
- US PPI, Retail Sales, New Unemployment Insurance Claims, Business Inventories, Thursday
- Chinese real estate prices Friday
- Japan's largest trade union federation announces results of annual wage negotiations on Friday ahead of Bank of Japan policy meeting
- Bank of England releases inflation survey on Friday
- US Industrial Production, University of Michigan Consumer Sentiment, Empire Manufacturing, Friday
The main movements in the market are:
stock
- S&P 500 futures were little changed as of 2:44 p.m. Tokyo time.
- Nikkei 225 futures (OSE) fell 0.1%
- Japan's TOPIX fell 0.3%
- Hong Kong's Hang Seng rose 0.6%
- Shanghai Composite: Almost no change
- Euro Stoxx50 futures little changed
- Nasdaq 100 futures little changed
currency
- Bloomberg Dollar Spot Index little changed
- The euro was almost unchanged at $1.0928.
- The Japanese yen remained almost unchanged at 147.60 yen to the dollar.
- The offshore yuan was little changed at 7.1928 yuan to the dollar.
- The Australian dollar rose 0.2% to $0.6616.
cryptocurrency
- Bitcoin rose 1.6% to $72,173.82
- Ether rose 2.2% to $4,037.55.
bond
- The 10-year government bond yield was almost unchanged at 4.14%.
- Japan's 10-year bond yield fell 1 basis point to 0.760%.
- The Australian 10-year bond yield rose 7 basis points to 4.02%.
merchandise
- West Texas Intermediate crude rose 0.8% to $78.17 per barrel.
- Spot gold remained largely unchanged.
This article was produced in partnership with Bloomberg Automation.
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