Asia Stocks Seen Steady Amid Inflation Worries: Markets Wrap

(Bloomberg) – Stocks in Asia are poised to open steady Tuesday as investors remain cautious about whether central banks can raise rates to rein in inflation without derailing growth.

Futures inched lower in Japan, Australia and Hong Kong. European equities climbed with US futures. US markets were closed Monday for the Memorial Day holiday.

European bonds tumbled after German inflation numbers added to pressure on central bank policy makers to tame rising prices. The dollar slipped for a third day.

In China, purchasing managers indexes for May are likely to show service and manufacturing activity continuing to shrink amid Covid lockdowns, despite progress in containing the virus and resumed production at some Shanghai plants, according to Bloomberg Economics.

Global stocks are on track to end the month with modest gains amid skepticism about whether the market is near a trough and as volatility stays elevated. Fears that central bank rate hikes will induce a recession and uncertainty around how China will boost its flailing economy are keeping investors watchful.

“The mood is temporarily better in the markets,” said Chris Iggo, chief investment officer for core investments at AXA Investment Managers, in a note. “I think the worst is over for bond markets but picking the bottom in equities is trickier. Iggo said another 10% -15% drop in equity markets couldn’t be ruled out.

German inflation hit another all-time high, adding urgency to the European Central Bank’s exit from crisis-era stimulus after numbers from Spain also topped economists’ estimates. The reports came 10 days before a crucial ECB meeting where officials are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.

In the US, Federal Reserve Governor Christopher Waller said he wants to keep raising interest rates in half-percentage point steps until inflation is easing back towards the central bank’s goal.

Meanwhile, President Joe Biden will hold a rare Oval office meeting on Tuesday with Fed Chair Jerome Powell amid the highest inflation in decades and ahead of US payroll numbers later this week.

Oil climbed to around $ 117 a barrel in response to the easing of Chinese lockdowns and as the European Union worked on a plan to ban imports of Russian crude.

China in Danger of Exporting Fresh Inflation Turmoil: MLIV Pulse

Here are some key events to watch this week:

  • China PMI Tuesday
  • Euro zone CPI Tuesday
  • The Federal Reserve is set to start shrinking its $ 8.9 trillion balance sheet Wednesday
  • The Fed releases its Beige Book report on regional economic conditions Wednesday
  • New York Fed President John Williams, St. Louis Fed President James Bullard speaks at separate events Wednesday
  • OPEC + virtual meeting Wednesday
  • Cleveland Fed President Loretta Mester discusses the economic outlook Thursday
  • US May employment report Friday
  • The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday

Some of the main moves in markets:

Stocks

  • Futures on the S&P 500 rose 0.5%
  • Futures on the Nasdaq 100 rose 1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%
  • The Japanese yen was at 127.59 per dollar
  • The offshore yuan was at 6.6715 per dollar
  • The euro was at $ 1.0779

Bonds

  • Germany’s 10-year yield advanced nine basis points to 1.06%

Commodities

  • West Texas Intermediate crude rose 1.8% to 7 117.17 a barrel
  • Gold futures were at $ 1,855.24 an ounce

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