Asian stocks set to rise; longer term yields fall

Asian stocks set to rise; longer term yields fall
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(Oct 14): Asian stocks looked set to rise Thursday after longer term Treasury yields and the dollar fell as traders weighed elevated U.S. inflation and Federal Reserve minutes affirming a looming reduction in stimulus.

Futures edged up in Japan and Australia after U.S. shares snapped a three-day losing streak, with the tech-heavy Nasdaq 100 outperforming the S&P 500. U.S. contracts were steady in early Asian trading.

Longer maturity Treasuries rallied amid a strong 30-year auction, the yield curve flattened and a gauge of the dollar retreated. Annual U.S. inflation held above 5% for a fourth month. The Fed minutes signaled a tapering of bond purchases beginning mid-November or mid-December.

Crude oil stabilized above US$80 a barrel. Hong Kong markets are shut Thursday for a holiday. Upcoming China inflation figures will offer another read on price pressures stoked by supply chain disruptions and a jump in energy prices.

Investors continue to evaluate the resilience of the economic recovery from the pandemic to the surge in inflation and the prospect of reduced central bank policy support. In the earnings season so far, executives at S&P 500 companies mentioned the phrase “supply chain” about 3,000 times on investor calls as of Tuesday -- far higher than last year’s then-record figure.

“The big question will be how companies are able to handle the myriad of inflationary pressures from an earnings perspective,” Steve Chiavarone, portfolio manager at Federated Hermes, said in an email. “Wage pressure, labor shortages, supply chain disruptions, higher input costs, surging energy prices amid a global energy crunch, along with the likelihood of higher interest and tax expenses may be too much for firms to digest.”

The Biden administration is trying to relieve supply-chain bottlenecks ahead of the Christmas shopping season, but officials acknowledge their options are limited.

Among U.S. earnings, JPMorgan Chase & Co.’s dealmakers posted their best quarter yet, though consumer and commercial loan growth remained challenged.

Here are a few events to watch this week:

  • Bank of America Corp., Morgan Stanley and Citigroup Inc. report earnings on Thursday
  • U.S. initial jobless claims, PPI on Thursday
  • Goldman Sachs Group Inc. reports earnings on Friday
  • U.S. business inventories, University of Michigan consumer sentiment, retail sales on Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 7:01 a.m. in Tokyo. The S&P 500 rose 0.3%
  • Nasdaq 100 futures increased 0.1%. The Nasdaq 100 rose 0.8%
  • Nikkei 225 futures climbed 0.2%
  • Australia’s S&P/ASX 200 Index futures gained 0.7%

Currencies

  • The Japanese yen was at 113.26 per dollar
  • The offshore yuan traded at 6.4287 per dollar
  • The Bloomberg Dollar Spot Index fell 0.5%
  • The euro traded at US$1.1598

Bonds

  • The yield on 10-year Treasuries declined four basis points to 1.54%
  • Australia’s 10-year yield fell six basis points to 1.63%

Commodities

  • West Texas Intermediate crude was at US$80.59 a barrel
  • Gold was at US$1,793.17 an ounce