Asia shares mixed on Fed warning, China hopes

  • The Fed’s Waller plays down CPI as just a number
  • Beijing puts support for property, steps COVID
  • Biden meets Xi at G20 meeting

SYDNEY, Nov 14 (Reuters) – Asian stock markets were mixed on Monday as a top U.S. central banker warned investors not to take too much of an inflation number, while Chinese shares gained on signs of help for the property sector the difficult

A modest miss on US inflation was enough to see two-year Treasury yields plunge 33 basis points for the week and the dollar lost nearly 4%, the fourth largest weekly decline since the era of free floating exchange rates began more than 50 years ago

However, the Federal Reserve did not welcome the resulting easing in US financial conditions and Governor Christopher Waller said it would take a series of soft reports for the bank to take its foot off the brakes. read more

Waller added that markets were well ahead of themselves on one inflation print, though he acknowledged the Fed could now start thinking about hiking at a slower pace.

Futures are betting heavily on a half-point rate increase to 4.25-4.5% in December and then a couple of quarter-point moves to a peak in the 4.75-5.0% range.

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The two-year yield rose as high as 4.41%, after plunging as low as 4.29% on Friday.

Bruce Kasman, head of economic research at JPMorgan, said: “The surprise downside CPI aligns with a host of indicators pointing to a downshift in global inflation that should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere.

“This positive message must be tempered by the recognition that the downshift in inflation will be too small for central banks to declare mission-accomplished, and more tightening is likely on the way.”

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.8%, after jumping 7.7% last week.

Japan’s Nikkei (.N225) eased 0.6%, while South Korea (.KS11) went flat. S&P 500 futures dipped 0.3% and Nasdaq futures lost 0.4%.

EUROSTOXX 50 futures gained 0.4%, while FTSE futures tacked on 0.1%.


Dealers were also waiting to see if Chinese shares could extend their strong rally amid reports regulators asked financial institutions to extend more support to stressed property developers. read more

China’s real estate index (.CSI000952) jumped 5% in response. Blue chips (.CSI300) rose 1.4% helped by a slew of changes in China’s COVID curve, even as the country reported more cases over the weekend. read more

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“It is difficult to see how the news of the case is anything but negative from an economic point of view, but it is symbolic of the movement, even if it is small, in the strategy of zero COVID that the markets are happily holding on to,” said Ray Attrill, head of FX strategy. in NAB.

US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions high on his agenda. read more

The news about the COVID rules favored a brief rebound in the yuan last week, which added to strong pressure on the dollar as yields plunged. The dollar recovered slightly early on Monday as its index added 0.4% to 106.870, but remained well short of last week’s top of 111.280.

The euro eased a touch of $ 1.0324, after rising 3.9% last week, while the dollar firmed at 139.27 yen after 5.4% drubbing last week.

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The dollar lost almost as much as the Swiss franc, led in part by the Swiss National Bank’s warning that it would use interest rates and currency purchases to tame inflation. read more

Sterling eased back to $1.1790 ahead of the UK Chancellor’s Autumn Statement on Thursday where he is expected to include tax increases and spending cuts. read more

Crypto currencies remained under pressure as at least $1 billion in customer funds were reported to have disappeared in the collapse of crypto exchange FTX. read more

Bitcoin was trading down 1.5% at $16,055, having shed nearly 22% last week.

The dollar’s recent retreat gave commodities a much-needed boost, with gold holding at $1,763 an ounce after jumping over $100 last week.

Oil futures extended their gains on hopes of a pick up in Chinese demand with Brent up 63 cents at $96.62, while US crude rose 56 cents to $89.52 per barrel.

Report by Wayne Cole; Edited by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.


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