Asian shares subdued, Kiwi shares fall on inflation outlook: markets close

(Bloomberg) — Asian stocks traded in narrow ranges on Wednesday after the S&P 500 trended higher. The New Zealand dollar fell after the country's central bank said inflation expectations had fallen.

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The currency fell 0.8% after the Reserve Bank of New Zealand said risks to the inflation outlook had become more balanced, noting that most measures of price expectations had fallen. Key interest rates were maintained as economists expected.

Stocks in Hong Kong and mainland China fluctuated at the start of trading ahead of the city's budget, due to be released on Wednesday, and a key political meeting in Beijing next week. Troubled Chinese developer Country Garden Holdings Co. slumped after receiving a liquidation filing in Hong Kong, which also dragged down industry peers.

Stock benchmarks fell in Japan and Australia, while those in South Korea rose. U.S. futures were little changed even after consumer confidence fell for the first time in four months.

Investors in the U.S. are now grappling with a decline in expectations about how much the Federal Reserve will cut interest rates and a rush of new corporate issuance that offers plenty of alternatives for yield-seeking investors. Traders no longer expect the Fed to cut interest rates by more than 75 basis points in 2024, putting their assessment in line with what policymakers have said is the most likely outcome.

“We continue to recommend that investors act soon to lock in attractive bond yields at this time,” said Solita Marcelli of UBS Global Wealth Management. “We particularly like the five-year quality bond segment as this part of the yield curve offers the best combination of high yields, stability and sensitivity to falling interest rate expectations.”

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Traders refrained from making big bets ahead of Thursday's inflation data and a parade of central bank speakers. Government bonds in Asia stabilized after a $42 billion auction of seven-year notes and a large number of new corporate bonds. Wall Street was once again busy selling bonds as issuers looked to borrow ahead of key economic data later this week.

The global economy's chances of a soft landing are rising, finance chiefs said in a draft of the G-20's final statement at this week's meeting in Brazil, citing a faster-than-expected decline in inflation as one of the upside risks. Meanwhile, Goldman Sachs Group Inc. Chief Executive David Solomon said weaker consumer spending is challenging expectations that the U.S. economy will avoid a recession.

Fed Governor Michelle Bowman reiterated her expectation that inflation will fall further if interest rates remain at their current levels – but said it is too early to start cutting rates – joining a number of officials who stressed , that they are in no hurry to reduce borrowing costs.

In the corporate world, WuXi AppTec Co. has become the best-selling Chinese stock this year amid fears of U.S. sanctions, a reversal from last year when the biotech company's shares were coveted by foreign investors. Shares of Chinese gaming company NetEase Inc. rose in Hong Kong after its stock was added to Beijing's latest approval list.

Elsewhere, oil prices eased after a two-day rise as traders assessed a report showing higher U.S. inventories and the likelihood that OPEC+ will extend production cuts.

Important events this week:

• Eurozone economic confidence, consumer confidence, Wednesday

• US wholesale inventories, GDP, Wednesday

• The Fed's Raphael Bostic, Susan Collins and John Williams speak on Wednesday

• The finance ministers and central bank chiefs of the G-20 will meet from Wednesday to Thursday in Sao Paulo

• Germany CPI, unemployment, Thursday

• US consumer income, PCE deflator, initial jobless claims, Thursday

• The Fed's Austan Goolsbee, Raphael Bostic and Loretta Mester speak on Thursday

• China's official PMI, Caixin manufacturing PMI, Friday

• Eurozone S&P Global Manufacturing PMI, CPI, Unemployment, Friday

• BOE chief economist Huw Pill speaks on Friday

• US Construction Spending, ISM Manufacturing, University of Michigan Consumer Sentiment, Friday

• The Fed's Raphael Bostic and Mary Daly speak on Friday

Some of the key moves in the markets:

Shares

• S&P 500 futures were little changed at 10:31 a.m. Tokyo time

• Japan's Topix fell 0.2%

• Australia's S&P/ASX 200 was little changed

• Hong Kong's Hang Seng fell 0.1%

• The Shanghai Composite has hardly been changed

• The Euro Stoxx 50 futures were hardly changed

• Nasdaq 100 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0841

• The Japanese yen was little changed at 150.44 per dollar

• The offshore yuan was little changed at 7.2129 per dollar

• The Australian dollar fell 0.1% to $0.6535

Cryptocurrencies

• Bitcoin rose 0.4% to $56,957.51

• Ether was little changed at $3,247.27

Tie up

• The 10-year Treasury yield fell two basis points to 4.29%

• Japan's 10-year yield rose one basis point to 0.695%

• Australia's 10-year yield rose four basis points to 4.17%

raw materials

This story was produced with support from Bloomberg Automation.

– With support from Rob Verdonck.

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