Asian Stocks Inch Ahead as Traders Brace for Inflation Data

Yomiuri Shimbun file photo
Tokyo Stock Exchange

SINGAPORE (Reuters) – Asian stocks edged higher on Tuesday, while the dollar was at its lowest in three months as investors remained convinced the Federal Reserve was done with its rate-hike cycle and looked ahead to a crucial inflation report later this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.39% higher and set for a near 7% gain in November, its strongest monthly performance since January.

Japan’s Nikkei eased 0.20% but is up 8% this month, on course for its strongest monthly performance in three years.

“The outlook for central bank policy has been a big factor driving the improvement in risk appetite in November,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

The evidence of an easing inflationary pressures has supported the view that many central banks are done with their tightening cycles and rate cut expectations for next year have been brought forward, Catril said.

Markets are pricing in a 96.8% likelihood that the U.S. central bank will leave interest rates unchanged next month, with the possibility of a rate cut starting to gain ground in mid-2024, according to CME’s FedWatch tool.

Investors will focus this week on the Fed’s preferred measure of inflation on Thursday and euro zone consumer inflation figures for further clarity on the where inflation is headed.

European Central Bank President Christine Lagarde said on Monday the central bank’s fight to contain price growth is not yet done, citing a still strong wage growth and an uncertain outlook even as inflation pressures in euro zone ease.

Fed Chair Jerome Powell is also due to speak on Friday his words will be scrutinized by traders to gauge where rates may head.

China’s blue-chip CSI 300 Index was 0.23% lower while Hong Kong’s Hang Seng index fell 0.70%, a day after data showed profit at China’s industrial firms grew at a slower pace in October.

U.S. data on Monday showed sales of new single-family homes fell more than expected in October, as higher mortgage rates reduced affordability, but the housing segment remains supported by a persistent shortage of existing properties on the market.

The weaker-than-expected data weighed on Treasury yields, with the yield on benchmark 10-year notes US10YT=RR slipping 9.6 basis points on Monday. In Asian hours, they were up 1.6 basis points at 4.404%. US/

The dollar index =USD, a measure of the greenback against a basket of currencies, fell to 103.11, its lowest since Aug. 31. The Japanese yen JPY=EBS strengthened 0.28% to 148.25 per dollar.

Oil prices inched higher on Tuesday after a steep fall the previous day as investors awaited this week’s OPEC+ meeting and expected curbs on supplies into next year.

U.S. crude CLc1 was 0.31% higher at $75.09 per barrel and Brent was back above $80. O/R

Spot gold XAU= added 0.1% to $2,015.00 an ounce, just shy of the three month high it touched on Monday.