(Bloomberg) — Asian equities are set to open lower Tuesday following declines in European stocks and bonds as European Central Bank officials tampered down rapid rate cut expectations. US markets were shut for a holiday Monday.
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Share futures for Australian and Hong Kong benchmarks slipped, while those for Japanese equities rose. The region-wide Euro Stoxx 50 inched 0.3% lower Monday, partly weighed down by a contraction in German gross domestic product in the fourth quarter, although Europe’s largest economy managed to avoid recession.
Elsewhere, oil prices retreated, even as tensions in the Red Sea endured. Houthi militants hit a US-owned commercial vessel with a ballistic missile on Monday, underscoring the risks facing one of the world’s most important trade routes. West Texas Intermediate, the US oil price, fell 0.3%, while Brent, the international benchmark slipped 0.2% Monday.
“Despite the conflict leading to the suspension of certain Red Sea routes, global oil supplies have not been significantly impacted,” Saqib Iqbal, an analyst at Trading.Biz, said in a note. “The focus shifts to key economic data releases from the US and China, providing valuable insights into potential demand.”
ECB Governing Council member Robert Holzmann indicated cuts this year were not assured given lingering inflation and geopolitical risks, in Monday comments. The sentiments echo prior comments from ECB President Christine Lagarde in warning that it’s too early to talk about trimming borrowing costs.
German bunds fell in a decline that highlights a chasm between market expectations or European Central Bank rate cuts and a less optimistic outlook among economists. The market is pricing in around six cuts, while economists polled by Bloomberg see four 25 basis point reductions as a more realistic scenario.
Australian and New Zealand yields crept higher in early Asian trading, mirroring the selling pressure in Europe. The dollar rose against major currencies with the New Zealand dollar and Norwegian krone the laggards among the G-10.
In other commodities, gold rose 0.4% to around $2,056 per ounce and Bitcoin edged 0.5% higher to above $42,000 Monday. European natural gas futures tumbled to the lowest since August, underscoring the region’s success in bolstering supplies since the energy crisis in 2022.
In corporate news, Apple Inc. is planning to remove its blood-oxygen feature from its latest smartwatches to get around a US ban of the devices if an appeal of the decision fails.
Rio Tinto Group, the world’s top iron ore exporter, reported production of the steelmaking material fell 2% in the fourth quarter.
US earnings reports due later Tuesday for the fourth quarter include Goldman Sachs Group Inc and Morgan Stanley.
Investors will also be looking ahead to inflation readings in Germany and the UK, as well as a swath of political leaders and officials including Chinese Premier Li Qiang attending the annual WEF. A speech by Federal Reserve Governor Christopher Waller, after officials last week attempted to temper any expectation of a looming rate cut, will also be closely watched.
Some key events in markets this week:
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Japan PPI, Tuesday
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Germany CPI, ZEW survey expectations, Tuesday
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UK unemployment, Tuesday
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US Empire Manufacturing, Tuesday
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Goldman Sachs Group Inc., Morgan Stanley to report earnings, Tuesday
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Federal Reserve Governor Christopher Waller speaks, Tuesday
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China GDP, property prices, retail sales and industrial production, Wednesday
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Eurozone CPI, Wednesday
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UK CPI, Wednesday
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US retail sales, industrial production, business inventories, Wednesday
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Federal Reserve issues Beige Book survey, Wednesday
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European Central Bank President Christine Lagarde speaks at Davos, Wednesday
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New York Fed President John Williams speaks, Wednesday
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Australia unemployment, Thursday
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Japan industrial production, Thursday
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European Central Bank publishes account of December policy meeting, Thursday
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US housing starts, initial jobless claims, Thursday
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Atlanta Fed President Raphael Bostic speaks, Thursday
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Japan CPI, Friday
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US existing home sales, University of Michigan consumer sentiment, Friday
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US Congress faces deadline to pass spending agreement before part of federal government shuts down, Friday
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San Francisco Fed President Mary Daly speaks, Friday
Here are some of the main moves in markets:
Stocks
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro was unchanged at $1.0950
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The Japanese yen was little changed at 145.75 per dollar
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The offshore yuan was little changed at 7.1863 per dollar
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The Australian dollar was little changed at $0.6661
Cryptocurrencies
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Bitcoin fell 0.4% to $42,506.99
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Ether fell 0.5% to $2,508.12
Bonds
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The yield on 10-year Treasuries was little changed at 3.94%
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Japan’s 10-year yield declined three basis points to 0.555%
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Australia’s 10-year yield advanced four basis points to 4.12%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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