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- Nikkei down 0.5%, S&P 500 futures down 0.2%
- Dollar holds gains ahead of US CPI, retail trade data
- A chorus of Fed officials will speak this week
SYDNEY, Feb 13 (Reuters) – Asian stocks slid on Monday as investors sought US inflation and retail sales data that could shake the outlook for interest rates around the world while moderating or accelerating the recent rise in bond yields.
A touch of geopolitical mystery was added by news that the US Air Force shot down a flying object near the Canadian border, the fourth object shot down this month. Continue reading
Officials declined to say if it resembled the large white Chinese balloon that was shot down earlier this month.
In any case, it was an added reason for caution, and MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) slipped 0.1% after shedding 2.2% last week.
Japan’s Nikkei (.N225) fell 0.5% and South Korea’s (.KS11) fell 0.3%. S&P 500 futures are down 0.2%, while Nasdaq futures are down 0.3%.
Near-term direction for assets could well be determined by US consumer price and retail sales data this week, with much dependent on whether inflation slowed further in January.
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Average forecasts are for total and core consumer prices to rise 0.4% for the month with sales recovering 1.6%.
Risks could be on the upside as a reanalysis of seasonal factors released last week led to upward revisions to the CPI in December and November. As a result, core inflation rose to 4.3% on an annualized three-month basis from 3.1%. Continue reading
There were also changes to the weights for accommodation costs and used car prices, which could skew the consumer price index upwards.
Bruce Kasman, head of economic analysis at JPMorgan, expects core CPI to rise 0.5% and revenue to rise 2.2%, underscoring the message of resilience from the January shock absorber report.
“Labor markets in developed countries have tightened in recent months, contrary to our expectations of an easing,” says Kasman.
“The latest news reinforces the belief that we are not on the path to a soft landing and that ultimately a recession will be needed to bring inflation back into the central bank’s comfort zone.”
Markets have already significantly raised the profile for future Federal Reserve tightening, with rates now peaking at around 5.15% and rate cuts coming later and more slowly.
There’s also a slew of Fed officials speaking this week to respond to the data in a timely manner.
10-year Treasury yields are at a five-week high of 3.75% after rising 21 basis points last week, while two-year Treasury yields hit 4.51%.
This shift helped stabilize the dollar, particularly against the euro, which fell 1.1% last week to move to $1.0670, a far cry from its early February high of $1.0987.
The dollar also rose against the yen on Friday amid reports that the Japanese government is likely to appoint academic Kazuo Ueda as the next Bank of Japan governor.
The surprise news sparked speculation that the BOJ’s super-loose policies might soon end, although Ueda himself later said that was appropriate to the current stance. Continue reading
The dollar was last seen trading at 131.50 yen after recovering from a low of 129.80 on Friday.
The rise in yields and the dollar weighed on gold prices, which held steady at $1,862 an ounce compared to a high of $1,959 in early February.
Oil prices eased somewhat after spiking on Friday when Russia announced it would cut its daily production by 5% in March after the West imposed price caps on Russian oil and oil products.
Brent fell 36 cents to $86.03 a barrel, while US crude fell 35 cents to $79.37.
Reporting by Wayne Cole; Edited by Shri Navaratnam
Our standards: The Thomson Reuters Trust Principles.
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