(Bloomberg) — Asian stocks were muted Tuesday, following a subdued session on Wall Street as investors positioned for this week’s Federal Reserve decision and US inflation data.
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Shares in Japan and Korea posted early gains, while those in China and Hong Kong edged lower as they reopened after a public holiday. Australia was the region’s worst performer, with the benchmark falling more than 1%. Traders are bracing for possible volatility following the US macroeconomic catalysts, and the potential for more political uncertainty in Europe.
Treasuries crept higher in Asia with the 10-year yield dropping two basis points, while the dollar gained versus most of its major peers. Australia’s 10-year yield jumped, mainly catching up with Friday’s move in Treasuries as traders pushed out their timeline for Fed interest-rate cuts.
Wall Street’s most-prominent trading desks from JPMorgan Chase & Co. to Citigroup Inc. are urging investors to prepare for a potential stock-market jolt after US consumer price data and the Fed rate decision both due Wednesday.
The Fed is widely expected to keep borrowing costs on hold, but there’s less certainty on officials’ rate projections. A 41% plurality of economists expect policymakers to signal two cuts in their “dot plot” while an equal number expect the forecasts to show just one or no cuts at all.
“The interest-rate guessing game goes on,” said Chris Larkin at E*Trade from Morgan Stanley. “Even the friendliest inflation numbers probably won’t push the Fed to act any sooner than September.”
Investors are also gearing up for a Bank of Japan policy decision Friday. The BOJ is expected to discuss cutting bond purchases at the gathering, with some economists predicting the central bank will also lay the groundwork for raising rates next month.
In commodities, oil pushed higher following its biggest gain since March, ahead of an OPEC report that will provide a snapshot on the market outlook. Gold clawed back some of Friday’s losses as traders look ahead to the Fed meeting.
The S&P 500 rose 0.3% Monday to close at a fresh record high. Nvidia Corp. began trading after a 10-for-one stock split. GameStop Corp. slumped 12%.
Apple Inc. sank even after unveiling new artificial-intelligence features. Billionaire Elon Musk said he would ban Apple devices from his companies if OpenAI’s artificial intelligence software is integrated at the operating system level, calling the tie-up a security risk.
European shares slid Monday after French President Emmanuel Macron called a legislative vote in the wake of a crushing defeat in European Parliament elections. Yields on France’s 10-year bonds climbed to their highest this year, while the nation’s top banks tumbled.
“The release of a new ‘dot plot’ outlining Fed projections for the path of rates will be the top focus,” said Jason Pride and Michael Reynolds at Glenmede. “For fixed-income investors, the Fed’s more patient higher-for-longer approach is likely to keep bond yields elevated as inflationary pressures remain.”
More than 60% of respondents in the latest MLIV Pulse survey expect US stocks to outperform Treasuries on a volatility-adjusted basis next month. That reading has been higher only three times in the history of the survey going back to August 2022.
Corporate Highlights:
Activist Elliott Investment Management called for sweeping changes to Southwest Airlines Co.’s leadership to reverse what it sees as years of underperformance by one of the biggest US carriers.
Advanced Micro Devices Inc. was cut at Morgan Stanley, which said investor expectations for the chipmaker’s AI business “seem too high.”
KKR & Co., CrowdStrike Holdings Inc. and GoDaddy Inc. will join the S&P 500 as part of its latest quarterly weighting change.
Noble Corp., the world’s biggest offshore oil-rig contractor by market value, agreed to buy its smaller rival Diamond Offshore Drilling Inc. in a deal valued at $1.6 billion.
Key events this week:
China PPI, CPI, Wednesday
Germany CPI, Wednesday
US CPI, Fed rate decision, Wednesday
G-7 leaders summit, June 13-15
Eurozone industrial production, Thursday
US PPI, initial jobless claims, Thursday
Tesla annual meeting, Thursday
New York Fed President John Williams moderates a discussion with Treasury Secretary Janet Yellen, Thursday
Bank of Japan’s monetary policy decision, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 10:28 a.m. Tokyo time
Nikkei 225 futures rose 0.4%
Japan’s Topix rose 0.3%
Australia’s S&P/ASX 200 fell 1.3%
Hong Kong’s Hang Seng fell 1.1%
The Shanghai Composite fell 0.3%
Euro Stoxx 50 futures rose 0.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0764
The Japanese yen was little changed at 157.17 per dollar
The offshore yuan was little changed at 7.2698 per dollar
Cryptocurrencies
Bitcoin fell 0.3% to $69,400.99
Ether fell 0.2% to $3,664.23
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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