Asian stocks were mixed after cautious trading on Wall Street, as traders awaited U.S. inflation data that is set to influence the timing of the Federal Reserve's policy shift to easing.
Japanese stocks fell for a second day amid growing speculation the central bank will adjust policy when it meets next week. Australian and South Korean shares rose.
The yield on Japan's 10-year bonds also rose to a three-month high after a media report said policymakers would end negative interest rates this month if wage data came in strong. Producer price data released early Tuesday beat estimates.
The chance of the Bank of Japan changing its negative interest rate policy would be very high if wage negotiations in the spring ended with a rise of more than 4%, said Kelvin Tay, chief investment officer at UBS Global Wealth Management in Singapore.
Any rise in the yen's value as a result would likely lead to a negative performance in the Japanese stock market, he said in an interview with Bloomberg Television. So we're actually very cautious about that, he added.
Hong Kong shares rose for a third day, while state-backed China Vanke fell after Moody's pulled the company's credit rating from investment grade and warned of possible further downgrades.
Steel stocks decline
Steel-related stocks in Asia fell, after iron ore posted its biggest drop since 2022.
U.S. stock futures rose after the S&P 500 and Nasdaq 100 closed slightly lower on Monday. Investors are awaiting further evidence on whether the recent surge in U.S. consumer prices is a blip or evidence that the deflationary trend has reached a dead end. After closing at record highs 16 times this year, the S&P 500 has shown signs of overheating, prompting warnings of near-term consolidation.
U.S. consumers’ expectations for inflation over the next three years rose in February, according to a survey from the Federal Reserve Bank of New York. The figures came ahead of data Tuesday that is expected to show inflation eased only gradually last month, suggesting why U.S. officials are in no rush to cut interest rates.
Treasuries were little changed after Monday’s slide, as traders braced for another wave of high-quality corporate debt sales. The dollar was slightly lower against most of its G10 peers.
While the S&P 500 has fallen on just four CPI days in the past 12 months, volatility has been increasing in those sessions this year. Over the past six months, the stock index has moved about 0.8% in either direction on the day the CPI is released, according to data compiled by Bloomberg. That’s the biggest move since April and up from less than 0.5% in September.
For Ameriprise's Anthony Saglimbin, investors are likely already digesting a lot of the good news into stock prices, and are moving forward based on incoming data that supports the soft landing narrative.
He noted that stocks are likely to be a bit late in a consolidation, or go through a prolonged period of modest declines sometime this year. Barring a major shift in the fundamental picture, we believe investors will welcome such a decline and treat it as a buying opportunity.
