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Asia Stocks Echo US Drop, Bitcoin Extends Rally: Markets Wrap


(Bloomberg) — Equities retreated in Asia as Treasuries and the dollar strengthened ahead of the Federal Reserve’s key inflation metric due Thursday that will help identify the path forward for interest rates.

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Australian, Japanese and South Korean shares all fell Thursday while equity futures for Hong Kong also slipped. US stock futures edged lower in early Asian trading after small losses for the S&P 500 and Nasdaq 100 on Wednesday.

Bitcoin extended gains after surging above $60,000 for the first time in more than two years on Wednesday, reflecting new demand from exchange traded funds. The currency almost touched $64,000 on Wednesday. The 2021 record high is just below $69,000.

Declines for US stocks came as data showed strong consumer spending despite a small revision to US gross domestic product growth in the fourth quarter of 2023. The report comes ahead of the Fed’s favored inflation gauge due Thursday and was broadly supportive of the caution voiced by Fed officials in recent weeks.

US stocks have reached a significant inflection point — poised to either “top out or broaden out,” according to Craig Johnson at Piper Sandler. Technical evidence suggests the next 10% move in the equity market is likely lower than higher, he added.

Treasuries opened cautiously in Asia after a rally Wednesday saw the 10-year yield falling four basis points and the policy-sensitive two-year slipping six basis points. Australian yields echoed the move in early Asian trading while New Zealand yields were little changed.

Foreign exchange markets were little changed early Thursday. The dollar gained against most major currencies Wednesday, most notably the New Zealand dollar, which fell 1.2% against the greenback.

In Asia, economic reports due Thursday include retail sales in Australia, fourth-quarter GDP data for India, the current account balance in Thailand, and inflation data for Sri Lanka and Vietnam.

China was again in focus after signs that regulators are taking steps to gradually shrink the size of a popular quantitative trading strategy that contributed to turmoil in the nation’s stocks this month, according to people familiar with the matter.

“We’ve not seen the proverbial policy bazooka,” said Brendan Ahern, chief investment officer for Krane Fund Advisors LLC, said on Bloomberg Television. Despite this, the tone from Beijing has shifted recently and gains over the past two weeks in Chinese stocks could build into a rebound. “Hopefully that trend does continue. If we can make money in China, more money will flow back in.”

Investors will also be gauging the impact of efforts to support Hong Kong’s real estate sector. The sweeping measures follow a tumble in home prices to a seven-year low.

New York Fed President John Williams said Wednesday the central bank has “a ways to go,” in its battle against inflation and Atlanta Fed chief Raphael Bostic urged patience in regard to policy tweaks. Overall, recent comments from Fed officials underscore the importance of data in guiding policy moves.

Following a jump in both the consumer and the producer price indexes, Thursday’s core personal consumption expenditures gauge will likely highlight the bumpy path the central bank faces in achieving its 2% target. The PCE is seen validating recent commentary from officials showing no rush to ease monetary policy.

“The recent data is ‘noise’ and should be ignored outside of its impact for very short-term market movements,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “We are more interested in the PCE data.”

Traders are currently pricing around 80 basis points of easing by year-end — almost in line with what officials in December indicated as the likeliest outcome. That would equate to three cuts in 2024 — as the Fed moves have historically been increments of 25 basis points. To put things in perspective, swaps were projecting almost 150 basis points of cuts this year at the start of February.

In commodities, oil prices fell, with West Texas Intermediate falling around 0.4% Wednesday. Gold strengthened to push the precious metal to $2,035 per ounce.

Key Events This Week:

  • Germany CPI, unemployment, Thursday

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

  • Fed’s Austan Goolsbee, Raphael Bostic and Loretta Mester speak, Thursday

  • China official PMI, Caixin manufacturing PMI, Friday

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

  • BOE chief economist Huw Pill speaks, Friday

  • US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday

  • Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.2% as of 9:04 a.m. Tokyo time

  • Hang Seng futures fell 0.4%

  • Japan’s Topix fell 0.2%

  • Australia’s S&P/ASX 200 fell 0.2%

  • Euro Stoxx 50 futures fell 0.1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0839

  • The Japanese yen was little changed at 150.61 per dollar

  • The offshore yuan was little changed at 7.2132 per dollar

  • The Australian dollar was little changed at $0.6495

Cryptocurrencies

  • Bitcoin rose 2.6% to $62,116.12

  • Ether rose 1.7% to $3,378.53

Bonds

  • The yield on 10-year Treasuries was unchanged at 4.26%

  • Japan’s 10-year yield declined one basis point to 0.685%

  • Australia’s 10-year yield declined four basis points to 4.12%

Commodities

This story was produced with the assistance of Bloomberg Automation.

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