Market Wrap: 10 January 2023

Market Wrap: 10 January 2023

Asian Stocks Mixed as Hawkish Fed Halts S&P Rally:

  • Australian stocks drop; Japan’s Topix gains after reopening
  • Fed officials see further rate hikes before holding above 5%

Asian stocks were mixed on Tuesday after a rally in US shares evaporated as Federal Reserve officials signaled the central bank will likely need to raise interest rates above 5% before pausing and holding for some time.

Shares in Australia, Hong Kong and mainland China declined, while Japan’s Topix Index advanced after reopening following a public holiday. Contracts on the S&P 500 were little changed after the index failed to stay above the key 3,900 level, erasing an advance that reached almost 1.5% Monday.

Traders hoping for a quick end to aggressive rate hikes as global inflation cools had a reality check on Monday, when Fed Bank of San Francisco President Mary Daly said she expects the central bank to raise rates to somewhere over 5%. Her Atlanta counterpart Raphael Bostic noted that policy makers should hike above 5% by early in the second quarter and then go on hold for “a long time.”

That leaves those betting on slower hikes waiting on Thursday’s US CPI report, that will come out almost a week after the latest jobs data showed that wage growth has decelerated. The figures will be among the last such readings policy makers will see before their Jan. 31-Feb. 1 gathering.

“After the sharp rally, Asian markets could see a bout of profit taking amid headwinds from tighter financial conditions and no respite in Fed rate-hike outlook,” said Nitin Chanduka, a strategist at Bloomberg Intelligence. “Expectations for China are improving, but economic data may not lend validation until the country’s rampant Covid outbreak runs its course.”



Key events this week:

  • US wholesale inventories, Tuesday
  • Fed Chair Jerome Powell among speakers at Riksbank symposium in Stockholm, Tuesday
  • World Bank expected to release global economic prospects report, Tuesday
  • ECB Governing Council members speak at Euromoney conference in Vienna, Wednesday
  • US CPI, initial jobless claims, Thursday
  • St Louis Fed President James Bullard at Wisconsin Bankers Association virtual event, Thursday
  • Richmond Fed President Thomas Barkin speaks at VBA/VA Chamber, Thursday
  • China trade, Friday
  • US University of Michigan consumer sentiment, Friday
  • Citigroup, JPMorgan Chase, Wells Fargo report earnings, Friday



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