SYDNEY, Nov 14 (Reuters) – Asian shares were jittery on Monday after the U.S. Federal Reserve warned investors ahead of an inflation number, while Chinese shares gained on signs of help for the country’s battered property sector.
A modest miss in U.S. inflation was enough to see the dollar lose nearly 4% on two-year Treasuries, down 33 basis points for the week — the fourth biggest weekly decline since the era of free-floating exchange rates began 50 years ago.
However, the Federal Reserve did not fully welcome the resulting easing of US financial conditions, with Governor Christopher Waller saying softer statements would be needed to get the bank to take its foot off the brakes. read more
Waller said markets were getting ahead of themselves on an inflation axis, although he acknowledged the Fed may now start thinking about hiking at a slower pace.
Futures are betting higher on a half-point rate of 4.25-4.5% in December, then a two-quarter-point peak in the 4.75-5.0% range.
The two-year yield rose to 4.42% after a deep dive to 4.29% on Friday.
“The negative CPI surprise is consistent with a broad range of indicators pointing to a slowdown in global inflation, which could encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Gassman, head of economic research at JP Morgan.
“This positive message should be tempered by the recognition that a reduction in inflation means central banks will be too low to declare the job done, and that further tightening is likely.”
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) It added 1.1% after rising 7.7% last week.
Nikkei of Japan (.N225) South Korea shed 0.8% (.KS11) Went flat. S&P 500 futures fell 0.3% and Nasdaq futures lost 0.5%.
EUROSTOXX 50 futures gained 0.4%, while FTSE futures gained 0.1%.
Eyes on China
Dealers were also waiting to see if Chinese stocks could extend their big rally, with restrictions urging financial institutions to provide more support to stressed property developers. read more
China’s real estate index (.CSI000952) 5% rise in response. Blue chips (.CSI300) The 1.1% rise was helped by several changes in China’s Covid restrictions, as the country reported more cases over the weekend. read more
“It’s hard to see the case news as negative from an economic standpoint, but it’s a sign of momentum, and markets are happily embracing the no-nonsense, zero-covid strategy,” said Ray Adrill, head of FX strategy. At NAB.
US President Joe Biden will meet Chinese President Xi Jinping in person on Monday for the first time since taking office, amid US concerns over Russia’s war in Taiwan, Ukraine and North Korea’s nuclear ambitions. read more
News of the Covid rules triggered a short-covering bounce in the yuan, adding to broader pressure on the dollar as yields fell. The yuan firmed 1.4% on Monday – the biggest such move since 2005.
The dollar index was at 106.920 on Monday, but still lower than last week’s 111.280.
The euro eased a touch to $1.0308 after rising 3.9% last week, while the dollar firmed at 139.49 yen following last week’s 5.4% drop.
The dollar lost against the Swiss franc in part on warnings from the Swiss National Bank that it would use rates and currency purchases to control inflation. read more
Sterling returned to $1.1755 ahead of the British Chancellor’s autumn statement on Thursday, where he is expected to set out tax rises and spending cuts. read more
Cryptocurrencies were under pressure as at least $1 billion in client funds reportedly disappeared from collapsed crypto exchange FTX. read more
Bitcoin fell 1.5% to trade at $16,055, having fallen nearly 22% last week.
The dollar’s recent retreat provided a much-needed fillip to commodities, with gold at $1,760 an ounce after rising more than $100 last week.
Oil futures extended their gains on hopes of rising Chinese demand, with Brent up 28 cents to $96.27, while U.S. crude gained 20 cents to $89.16 a barrel.
Reporting by Wayne Cole; Editing by Sri Navaratnam and Kenneth Maxwell
Our Standards: Thomson Reuters Trust Principles.
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