- S&P 500 posts modest gain a day after brutal selloff
- Dollar gauge retreats, short-end Treasury yields higher
Asian stocks are poised for a cautious start following their worst sell-off in two weeks after US equities rebounded as investors weigh the prospect of large interest rate hikes by the Federal Reserve. The dollar fell.
Asian equity futures signal gains ahead in Japan while Australian and Hong Kong stocks look set for mixed opens. US contracts edged higher after the S&P 500 closed in the green as dip-buyers emerged late in the session.
The subdued tone comes as data showed US producer prices fell for a second month, providing some relief after the jolt from consumer-price figures that prompted investors to ratchet up wagers for rate increases. Retail sales due Thursday and University of Michigan readings Friday will be parsed for clues on the strength of the economy and inflation expectations.
Swaps traders are pricing in a hike of three-quarters of a percentage point when the Fed meets next week, with some wagers appearing for a full-point move. The rise in rate-sensitive Treasuries on Wednesday deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.
While the magnitude of the stock rout was impressive following hot US inflation data, the S&P 500 only reversed most of the gains made in the previous four sessions. The lack of a surge in the VIX index — known as the “fear gauge” — suggests that the selloff was a recalibration of those expectations rather than panic selling.