© Reuters. FILE PHOTO: A passerby walks past an electric monitor displaying the graph of recent movements in the Japanese yen’s exchange rate against the U.S. dollar in Tokyo, Japan October 20, 2022. REUTERS/Issei Kato/File Photo
By Wayne Cole
SYDNEY (Reuters) – Asian stock markets were mixed on Monday as a top U.S. central banker warned investors against getting carried away by an inflation figure, while Chinese stocks gained on signs of help for the country’s hard-hit real estate sector.
A slight drop in US inflation was enough to see two-year Treasury yields plunge 33 basis points for the week and the dollar lose almost 4% – the fourth biggest weekly drop since the start of the era. floating exchange rates more than 50 years ago.
However, the resulting easing of financial conditions in the United States was not entirely welcomed by the Federal Reserve, with Governor Christopher Waller saying it would take a series of subdued reports for the bank to ease its brakes. .
Waller added that markets were well ahead of themselves on a single inflation print, although he admitted the Fed may now be starting to think about rising at a slower pace.
Futures are betting heavily on a half-point rate hike to 4.25-4.5% in December, then a few quarter points to top in the 4.75-5.0 range %.
Two-year yields rose slightly to 4.42%, after plunging to 4.29% on Friday.
“The CPI downside surprise aligns with a wide range of indicators pointing to lower global inflation which should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan (NYSE:).
“This positive message needs to be tempered by the recognition that the decline in inflation will be too small for central banks to declare mission accomplished, and further tightening is likely on the way.”
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 1.1%, after jumping 7.7% last week.
fell 0.8%, while South Korea was flat. fell 0.3% and Nasdaq futures lost 0.5%.
EUROSTOXX 50 futures gained 0.4%, while futures shed 0.1%.
EYES ON CHINA
Dealers were also waiting to see if Chinese stocks could extend their big rally amid reports that regulators have asked financial institutions to extend support to struggling property developers.
China’s property index jumped 5% in response. Blue chips rose 1.1%, helped by a host of changes to COVID restrictions in China, even as the country reported more cases over the weekend.
“It’s hard to see how the news on the case is anything but negative from an economic perspective, but that’s the symbolism of the movement, however small, in the zero COVID strategy that markets are hanging on happily,” said Ray Attrill, head of FX strategy. at NAB.
US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions top of mind. its agenda.
News on the COVID rules had fueled a rebound in short yuan hedging, which added to broad pressure on the dollar as yields plunged. The yuan strengthened 1.4% on Monday – the biggest such move since 2005.
It was up a fraction on Monday at 106.920, but still well below last week’s high of 111.280.
The euro eased slightly to $1.0308, after climbing 3.9% last week, while the dollar strengthened to 139.49 yen after falling 5.4% last week. .
The dollar lost almost as much to the Swiss franc, in part due to warnings from the Swiss National Bank that it would use rates and currency purchases to tame inflation.
The pound fell back to $1.1755 ahead of the UK chancellor’s autumn statement on Thursday, in which he is expected to outline tax hikes and spending cuts.
Cryptocurrencies remained under pressure as at least $1 billion in client funds were reported to have disappeared from the collapse of crypto exchange FTX.
was trading down 1.5% at $16,055, after losing nearly 22% in the past week.
The recent pullback in the dollar has given commodities a much-needed boost, with gold holding at $1,760 an ounce after surging above $100 last week. [GOL/]
Oil futures extended gains on hopes of a pickup in Chinese demand, rising 28 cents to $96.27 and rising 20 cents to $89.16 a barrel. [O/R]
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