(Bloomberg) — Shares mostly declined in Asia while Treasuries steadied Wednesday after a selloff in US equities and bonds as investors reined in wagers for Federal Reserve interest rate cuts this year.
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Hong Kong and mainland China stocks opened lower, joining counterparts from South Korea to Australia. Japan was an exception, where a weaker yen fueled gains. US equities futures were virtually flat.
The region’s weaker tone came after the S&P 500 lost 0.4% and Treasuries fell Tuesday, with yields on the 10-year note rising around 12 basis points.
The moves followed comments from Fed Governor Christopher Waller, who urged caution but said a rate cut this year was possible if inflation edges lower toward the central bank’s target. When the time is right, rates should be lowered “methodically and carefully,” Waller said during a virtual event on Tuesday.
“We view his comments emphasizing no need to rush as indicating that he does not expect to push for a March cut,” said Krishna Guha, vice chairman at Evercore ISI. The comments were “consistent with our baseline of a first cut in May or June,” Guha said.
Reflecting a recalibration of Fed rate cut expectations, swaps market pricing for a rate cut in March inched lower to around 65% from 80% on Friday.
China Data
Traders will now shift their attention to upcoming data out of China later today. Expected releases include fourth-quarter gross domestic product, retail sales and December industrial production.
Premier Li Qiang said in comments at the Davos summit in Switzerland that the economy grew at around 5.2% in 2023, exceeding the official target. Li said the growth came despite a lack of “massive stimulus” as the government “did not seek short-term growth while accumulating long term risk.”
In commodities, oil declined as the drag from a stronger US dollar and broader risk-off tone offset concerns over escalating Middle East tensions, including continued attacks on ships in the Red Sea by Iran-backed Houthi rebels.
Earlier, the greenback staged its biggest rally in 10 months on the move in yields as expectations on rapid rate cuts by the Fed this year diminished.
In US earnings, Morgan Stanley slid amid a warning on lower margins in wealth, while Goldman Sachs Group Inc. rose as profit beat estimates. Boeing Co. sank on an analyst downgrade. Apple Inc. slipped as the US Supreme Court refused to consider its appeal in an antitrust suit challenging the App Store.
Elsewhere, gold was steady after a Tuesday decline of more than 1% to trade around $2,028 per ounce and Bitcoin was steady above $43,000.
Key events this week:
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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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US retail sales, industrial production, business inventories, Wednesday
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Fed issues Beige Book survey of regional economic conditions, Wednesday
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New York Fed President John Williams speaks, Wednesday
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ECB President Christine Lagarde and ECB Governing Council members Klaas Knot and Boris Vujcic speak at Davos, Wednesday
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US housing starts, initial jobless claims, Thursday
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Republican presidential primary debate in New Hampshire, Thursday
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ECB President Christine Lagarde participates in Davos panel discussion, Thursday
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ECB publishes account of December policy meeting, Thursday
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Atlanta Fed President Raphael Bostic speaks, Thursday
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Canada retail sales, Friday
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Japan CPI, tertiary index, Friday
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US existing home sales, University of Michigan consumer sentiment, Friday
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ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos, Friday
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San Francisco Fed President Mary Daly speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 10:26 a.m. Tokyo time
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Nikkei 225 futures (OSE) rose 1.5%
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Japan’s Topix rose 1.5%
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Australia’s S&P/ASX 200 fell 0.2%
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Hong Kong’s Hang Seng fell 0.6%
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The Shanghai Composite fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0880
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The Japanese yen was little changed at 147.25 per dollar
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The offshore yuan was little changed at 7.2133 per dollar
Cryptocurrencies
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Bitcoin fell 0.6% to $43,166.45
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Ether fell 0.6% to $2,591.3
Bonds
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The yield on 10-year Treasuries declined one basis point to 4.05%
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Japan’s 10-year yield advanced two basis points to 0.610%
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Australia’s 10-year yield advanced four basis points to 4.20%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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