(Bloomberg) — Most stocks in Asia pointed to gains after the S&P 500 closed at a fresh record, with traders sticking to bets on Federal Reserve rate cuts for this year despite hotter-than-expected inflation data.
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Australia’s equity benchmark edged higher and futures for Japan pointed to an advance, while those for Hong Kong indicated a slight drop. The S&P 500 dipped on Tuesday after the consumer price index came only slightly above economist estimates, before rebounding to close up more than 1%.
Tech led the increases, while Treasuries remained lower after a $39 billion sale of 10-year notes and gold snapped nine days of record-breaking gains following the CPI print. A gauge of US-listed Chinese companies rose 4%, its biggest advance in more than a month. Australian 10-year yields gained in early Wednesday trading.
“While traders in the Asian market may feel confused by the combination of hotter-than-expected inflation data and record-high US stocks, Asian stocks are more likely to mirror the optimism from Wall Street,” said Hebe Chen, analyst at IG Markets. However, the CPI report “will undoubtedly prompt the Fed to choose their language with extra caution in next week’s meeting.”
The relative sense of calm in the face of a strong inflation print was unusual. In fact, the advance in stocks marked a break from how stocks have traded on CPI days since the Fed started lifting rates. An S&P 500 move of 1% or more has only happened on a handful of occasions on the day of the CPI release since March 2022. Most of the time, however, gains were on the back of lower — not higher — core inflation.
“It’s proving difficult to see what may stop the market’s momentum, as earnings, inflation, and interest rates are moving in the right direction,” said Skyler Weinand at Regan Capital.
The S&P 500 will deliver stronger-than-expected earnings in 2024, powered by resilient economic growth and artificial intelligence breakthroughs, according to Bank of America Corp. strategists — who are now among Wall Street’s most bullish profit forecasters.
As a flurry of analysts bump up their optimism toward US stocks in lockstep, Morgan Stanley’s Mike Wilson won’t budge, arguing he sees no justification to upgrade his outlook given an absence of broad earnings growth.
The strategist stuck to his year-end S&P 500 forecast of 4,500 in an interview on Tuesday with Bloomberg Surveillance Radio, even as a growing list of peers at firms including Bank of America Corp., Goldman Sachs Group Inc., and UBS Group AG have raised projections for the benchmark.
“A lot of folks have raised their price targets because of higher multiples,” Wilson said. “We’re not willing to do that.”
The Fed is widely expected to hold interest rates steady for a fifth straight meeting when policymakers gather March 19-20. Much of the focus by investors will be on the Federal Open Market Committee’s quarterly forecasts for rates, including whether fresh employment and inflation figures have prompted any changes.
In other markets, Bitcoin dropped after setting a record-high for the third time in five days, while a Bloomberg dollar gauge rose for the first session in March. Oil advanced early on Wednesday after an industry report indicated stockpiles in the US decreased by 5.5 million barrels last week.
Key events this week:
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Eurozone industrial production, Wednesday
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ECB Governing Council member Yannis Stournaras speaks, Wednesday
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Volkswagen, Adidas earnings, Wednesday
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US PPI, retail sales, initial jobless claims, business inventories, Thursday
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China property prices, Friday
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Japan’s largest union federation announces results of annual wage negotiations, just ahead of Bank of Japan policy meeting, Friday
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Bank of England issues inflation survey, Friday
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US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday
Some of the main moves in markets:
Stocks
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Australia’s S&P/ASX 200 rose 0.2% as of 8:18 a.m. Tokyo time
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S&P 500 futures were little changed. The S&P 500 rose 1.1%
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Nikkei 225 futures rose 1%
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Hang Seng futures fell 0.3%
Currencies
Cryptocurrencies
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Bitcoin rose 0.2% to $71,195.01
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Ether fell 0.2% to $3,942.53
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Georgina McKay, Richard Henderson and Rita Nazareth.
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