(Bloomberg) -- Shares climbed in Asia following a rally on Wall Street as investors position for US inflation data later Tuesday that might not be as bad as once feared.
Stocks advanced across most of the region, putting an Asia equity gauge on course to snap a two-day losing streak. Shares fluctuated in Hong Kong and on the mainland after an index of US-listed Chinese stocks earlier jumped by the most in almost two weeks.
The S&P 500 added 1.1% and the tech-heavy Nasdaq 100 climbed 1.6% after a survey showed Americans drastically reduced their expectations for household income growth amid tighter monetary policy.
Investors will be focused as well on the nomination of the next Bank of Japan governor as bets increase that yield-curve control and negative-rate policy may be abolished soon under the new leadership of Kazuo Ueda. The benchmark 10-year yield is sitting hard against the BOJ’s 0.5% ceiling.
The yen, which has appreciated steeply since late October, gained on Tuesday. Japan’s economy returned to growth in the three months through December, but while consumption recovered, business spending contracted and inventories dragged down on the economy.
The possibility of a prolonged hiking cycle in Japan will be the swing factor for the market, according to Morgan Stanley strategists John Kalamaras and Wanting Low. “To the extent a BOJ hiking cycle does not materialize, that should help cement JPY’s status as a ‘funding currency’,” they wrote in a note. “We think more conviction is needed though that BOJ’s reaction function will not be altered and hence stay neutral in the meantime.”
A gauge of greenback strength and 10-year US Treasury yields were both little changed.
Meanwhile, the Hong Kong Monetary Authority bought the local currency for the first time since November to manage its peg to the dollar. Late last week, the Hong Kong dollar touched the weak end of its 7.75-7.85 trading band versus the greenback, increasing the likelihood of government intervention.
Supporting stocks overnight was the New York Federal Reserve consumer survey, which showed that one-year inflation expectations were little changed in January. This was “modestly reassuring,” according to Vital Knowledge’s Adam Crisafulli.
US inflation probably accelerated in January to 0.5% from December’s 0.1%, while slowing year on year to 6.2% from 6.5%, according to estimates compiled by Bloomberg.
Oil prices, a key inflation component, fell on a report that the Biden administration plans to sell more crude oil from the Strategic Petroleum Reserve. Gold steadied.
Still, JPMorgan Chase & Co.’s Marko Kolanovic said that investors should be in bonds since “a recession is currently not priced into equity markets.” Morgan Stanley’s Michael Wilson argued that US stocks are ripe for a selloff after prematurely pricing in a pause in Fed rate hikes.
Key events:
- Japan’s new BOJ governor nomination Tuesday
- US CPI, UK jobless claims, Eurozone GDP, New York Fed President John Williams gives the keynote speech at New York Bankers Association event Tuesday
- US retail sales, UK CPI Wednesday
- US jobless claims, Australia unemployment, Cleveland Fed President Loretta Mester speaks at Global Interdependence Center event Thursday
- France CPI, Russia GDP Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 10:27 a.m. Tokyo time. The S&P 500 closed up 1.1%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 closed up 1.6%
- Japan’s Topix index rose 0.6%
- South Korea’s Kospi index rose 0.3%
- Hong Kong’s Hang Seng Index rose 0.3%
- China’s Shanghai Composite Index rose 0.1%
- Australia’s S&P/ASX 200 Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0728
- The Japanese yen rose 0.2% to 132.17 per dollar
- The offshore yuan was little changed at 6.8217 per dollar
Cryptocurrencies
- Bitcoin rose 0.4% to $21,721.03
- Ether rose 0.8% to $1,497.73
Bonds
- The yield on 10-year Treasuries was little changed at 3.69%
- Australia’s 10-year yield declined two basis points to 3.74%
Commodities
- West Texas Intermediate crude fell 1.2% to $79.14 a barrel
- Spot gold was little changed