Asia Stocks Set to Rise After Gains on Wall Street:
- Shares in Australia, futures in Japan, Hong Kong edge higher
- Robust US economic data indicate further Fed tightening ahead
Stocks in Asia were set for a minor advance Tuesday after US stocks managed small gains as investors digested further signs of economic strength, indicating a path of tighter monetary policy lies ahead.
Australian shares rose and futures contracts for equity benchmarks in Japan and Hong Kong climbed in line with the 0.3% advance for the S&P 500 on Monday. The tech-heavy Nasdaq 100 gained 0.7% as the two US indexes partly rebounded from swift declines Friday.
Australian and New Zealand 10-year yields inched lower after the benchmark 10-year Treasury yield fell three basis points to 3.91% on Monday. The dollar weakened against all G-10 currencies. The pound strengthened 1% against the greenback after the UK and European Union reached an agreement on Northern Ireland’s trading arrangements.
Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago. Federal Reserve Governor Philip Jefferson firmly stood by the central bank’s 2% inflation goal on Monday.
“It’s becoming increasingly clear to the market that the Federal Reserve is not yet finished with rate hikes,” said Seema Shah, Chief Global Strategist at Principal Asset Management, in a note. “Relentless monetary tightening will eventually weigh on both the economy and earnings — a headwind that will, inevitably, renew and extend the equity market drawdown.”
Monday’s data further outlined the challenge facing the central bank. Pending home sales increased in January by the most since June 2020. Durable goods orders fell, but after accounting for a drop in transportation equipment rose more than expected. Orders placed with US factories for business equipment also rose.
US wholesale inventories and consumer confidence data will be released later Tuesday. On Thursday, US initial jobless claims will shine further light on the health of the robust labor market.
Investors will be keeping a hawk-eye on Adani Group shares as the company continues on an investor roadshow in Asia. The group said in sessions on Monday that it has enough money to repay debts for the next three years in addition to an $800 million cash pile.
Elsewhere, the price of oil fell for the first time in three days as worries about higher interest rates outweighed expectations of higher demand from China.
Source: Bloomberg.com