Asian stocks fell, dollar companies ahead of the central bank’s interest rate hike

  • Japan’s Nikkei fell 0.2%. Hong Kong shares are down 2.2%.
  • The dollar is drifting higher. European futures point to a lower open
  • US CPI on Tuesday, Fed meeting on Wednesday
  • European Central Bank, interest rate decisions on the Bank of England on Thursday

SYDNEY (Reuters) – Asian stocks fell and the dollar held steady on Monday at the start of a busy week as markets awaited a flurry of interest rate decisions from the US Federal Reserve, European Central Bank and others.

This caution is expected to extend to European markets, with Euro Stoxx 50 futures down 0.5%, German DAX futures down 0.5%, and FTSE futures down 0.2%.

S&P 500 futures and Nasdaq futures fell 0.1%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.2%, erasing almost all of the previous week’s gains stemming from optimism that China is finally opening up its economy by dismantling its no-COVID policy.

Japan’s Nikkei (.N225) declined 0.2%.

Chinese companies fell 0.9%, while Hong Kong’s Hang Seng Index (.HSI) fell 2.2%, as investors’ focus shifted away from crippling COVID-19 restrictions to the surge in infections now crippling the economy.

Wall Street fell on Friday, Treasury yields advanced and the dollar pared earlier losses.

Tuesday’s US Consumer Price Index (CPI) report will set the tone for the markets for the week. Economists expect annual core inflation to ease to 6.1% in November, compared to a rise of 6.3% in the previous month.

The risk could be to the upside, after data on Friday showed producer prices rose faster than expected, sparking fears that the CPI report could signal that inflation is flat and interest rates may have to stay higher for longer.

Chris Weston said: “Hotter CPI – say 6.4% (and above) and the Fed’s hawkish score range and Powell statement could make funds call it a day for 2022 – and bleed risk into 2023 and funds buy back USD shorts.” , Head of Research at Pepperstone.

“It would be a big surprise if we don’t see the Fed back down to a 50bp increase… We also want to understand if Jay Powell opens the door to a slowdown to a 25bp rate hike from February – again, while in line with rates Market, it can be considered that we are nearing the end of the hiking cycle which is modest negative for the US dollar.”

The Federal Reserve is widely expected to raise interest rates by 50 basis points on Wednesday at its final meeting of 2022, though the central bank’s updated economic outlook and Fed Chair Jerome Powell’s press conference are also in focus.

Kevin Cummins, chief US economist at NatWest, said any surprise in the CPI report is unlikely to deter the Fed from raising interest rates by 50 basis points, though it will play a larger role in the policy statement and tone of Powell’s press conference. .

“As so often, updated point chart estimates and final (peak) rates will be more important to the policy outlook than near-term action this week — a topic that Powell will focus on in his prepared remarks and press conference,” Cummins said.

In addition to the Fed, the European Central Bank and the Bank of England are also set to announce rate hikes on Thursday with both likely to raise by 50 basis points, as policymakers continue to put curbs on growth to curb inflation.

In the currency markets, the US dollar drifted up 0.1% against a basket of currencies to 105.17, although it wasn’t too far from its five-month low of 104.1 a week ago.

The British pound fell 0.3% to $1.223, while the Australian dollar also fell 0.3% to $0.6759.

Treasury yields remained largely flat on Monday. The yield on the benchmark 10-year Treasury note held at 3.5600%, compared to closing in the US at 3.5670%. The two-year return touched 4.338%, up slightly from its US close of 4.330%.

In the oil market, prices rose amid uncertainty over the restart of a major pipeline supplying the United States and the threat from Russia to cut production in response to Western price caps on its exports. .

Brent crude futures rose 0.6% to $76.58 a barrel, while US West Texas Intermediate crude was at $71.62 a barrel, up 0.8%.

Spot gold was down 0.6% at $1,785.78 an ounce.

Editing by Lincoln Feist, Bradley Perrett and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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