- Asian Stock Markets:
- Nikkei dip, US stock futures fraction lower
- Focus on US inflation, bank survey
- The Bank of England was seen hiking again this week
SYDNEY, May 8 (Reuters) – Asian stocks crept higher on Monday as investors braced for a week in which US inflation data will test bets that the next rate move will fall, while worries over a possible credit crunch weighed on the dollar .
Friday’s robust US payroll report has already provided a setback to fading hopes and any upside surprise in consumer prices would cast doubt on bets on a rate cut as early as September.
Forecasts are for a 0.4% rise in April for both headline and core CPI, with the annual pace of core inflation decelerating just a tad to 5.5%.
Later Monday, the Federal Reserve’s survey of loan officers will draw unusually much attention as markets try to gauge the impact of regional bank stress on lending.
“The survey should indicate further broad-based tightening in bank lending standards,” said Bruce Kasman, head of economic research at JPMorgan.
“Persistent stress in the banking system naturally heightens concerns that a disruptive financial market event is looming,” he added. “Although our analysis suggests that against an otherwise healthy backdrop, the impact of a credit crunch tends to be limited.”
Beware of a slow start in markets and MSCI’s broadest index of Asia Pacific equities outside Japan (.MIAPJ0000PUS) edged up 0.3%, while Japan’s Nikkei (.N225) fell 0.3%.
S&P 500 futures and Nasdaq futures both declined 0.1% after rising on Friday on optimistic results from Apple (AAPL.O).
While the S&P 500 is up nearly 8% year to date, it’s all down to just five mega-stocks, which are up 29% combined so far this year and are trading at a 49% premium to the rest of the index .
Fixed income markets were still suffering from the strong payroll report, with US 2-year yields up 3.95% after briefly falling 3.657% last week.
Futures imply a nearly 90% chance of the Fed keeping rates steady at its next meeting in June and a 75% chance of a cut in September.
The market is still pricing in at least one more rate hike from the European Central Bank, while the Bank of England is widely expected to hike interest rates by a quarter point on Thursday. , .
The divergent interest rate outlook has supported the euro and sterling, with the latter hitting a one-year high against the US dollar last week. The euro held at $1.1018 on Monday, just below its recent high of $1.1096.
“While it is premature to feel too ‘surprise’ against the dollar until a clear peak in US interest rates is seen, the problems in the US banking sector, which have no easy/free solutions, continue to drive a mild bearish one medium term history. said Alan Ruskin, head of global FX strategy at Deutsche Bank.
“Certainly it imposes more growth constraints and a stronger stagflationary bias than for large competing economies.”
The dollar has outperformed the yen as the Bank of Japan remains the only central bank in the developed world that has not tightened monetary policy. The dollar was at 135.19 yen and the euro at 148.93, not far off a recent 15-year high of 151.55.
The prospect of a pause in US interest rate hikes has been a boon for non-yielding gold, which has held at $2,015 an ounce after nearing a record high last week.
Oil prices have moved in the opposite direction as fears of a global economic slowdown outweighed planned production cuts and US crude fell more than 7% last week.
Brent was last up 3 cents at $75.33 a barrel, while US crude was up 5 cents at $71.39 a barrel.
Reporting by Wayne Cole Editing by Shri Navaratnam
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