- Japanese Nikkei down 0.2%; Hong Kong shares fall 2.2%
- Dollar Floats Higher; European futures point to a lower open
- US CPI on Tuesday, Fed meeting on Wednesday
- ECB, BOE rate decisions on Thursday
SYDNEY, Dec. 12 (Reuters) – Asian stocks fell and the dollar strengthened on Monday at the start of a hectic week as markets awaited a flurry of interest rate decisions from the US Federal Reserve, European Central Bank and others.
Caution is expected to spill over into European markets, with Euro Stoxx 50 futures falling 0.5% across the region, German DAX futures losing 0.5% and FTSE futures falling 0.2%.
Both S&P 500 futures and Nasdaq futures fell 0.1%.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 1.2%, wiping out nearly all of last week’s gains driven by optimism that China will finally open up its economy with the dismantling of its zero-COVID policy.
Japan’s Nikkei (.N225) fell 0.2%.
Chinese blue chips fell 0.9% while the Hong Kong Hang Seng Index (.HSI) fell 2.2% as investor focus shifted from crippling COVID-19 restrictions to the wave of infections now sweeping the disrupt the economy.
On Friday, Wall Street fell, Treasury yields rose and the dollar offset previous losses.
A US consumer price index (CPI) report on Tuesday will set the tone for the markets for the week. Economists expect annual core inflation to ease to 6.1% in November, compared to an increase of 6.3% in the previous month.
The risk may be on the upside after Friday’s data showed producer prices had risen faster than expected, fueling concerns. The CPI report could indicate that inflation is stubborn and interest rates may need to stay high longer.
“A warmer CPI – say 6.4% (and up) and an aggressive series of points from the Fed and statement from Powell could mean funds will call it a day for 2022 – risk spills over into 2023 and funds buy USD shorts back,” said Chris Weston, Pepperstone’s chief research officer.
“It would be a big surprise if we didn’t see the Fed step down to a 50 bps hike… in line with market prices, it can be assumed that we are closer to the end of the walking cycle and a modest USD negative. “
The Federal Reserve is widely expected to raise rates by 50 basis points on Wednesday at its final meeting of 2022, though attention will also turn to the central bank’s updated economic projections and Fed Chairman Jerome Powell’s press conference.
Kevin Cummins, chief US economist at NatWest, said a surprise in the CPI report is unlikely to make the Fed back off from a 50 basis point rate hike, although it would play a bigger role in the policy statement and the tone of the press conference. Powell. .
“As is often the case, the updated dot chart and terminal (peak) rate estimates will be even more important to the policy outlook than the near-term action this week – a theme that Chairman Powell will focus on in his prepared remarks and press conference,” said Cummins. .
In addition to the Fed, the ECB and the Bank of England will also announce rate hikes on Thursday, both of which are likely to rise by 50 basis points as policymakers continue to slow growth to curb inflation.
In foreign exchange markets, the US dollar slumped 0.1% against a basket of currencies to 105.17, though not far from its five-month low of 104.1 a week ago.
Sterling fell 0.3% to $1.223, while the Australian dollar also fell 0.3% to $0.6759.
Treasury yields remained broadly stable on Monday. The yield on benchmark 10-year government bonds was 3.5600%, compared to the US closing price of 3.5670%. The two-year yield reached 4.338%, up slightly from the US closing rate of 4.330%.
In the oil market, prices rose on uncertainty about the restart of a major pipeline supplying the United States and Russia’s threat to cut production in retaliation for a Western price cap on its exports. .
Brent crude oil futures rose 0.6% to $76.58 a barrel, while the US West Texas Intermediate oil price was $71.62 a barrel, up 0.8%.
Spot gold was 0.6% lower at $1,785.78 an ounce.
Edited by Lincoln Feast, Bradley Perrett and Sam Holmes
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