Asian shares dip, dollar firms ahead of central bank rate hikes

  • Japan’s Nikkei 0.5% lower; Australian shares slide 0.7%
  • The dollar is drifting higher; The future of the US is collapsing
  • US produces steadily after acquisition; oil prices are rising

SYDNEY, Dec 12 (Reuters) – Asian shares were mixed on Monday while the dollar edged higher at the start of a tumultuous week, as markets await rate decisions from the US Federal Reserve, the European Central Bank and others.

The US inflation report on Tuesday will set the tone for the markets for the week. Economists expect core inflation to ease to 6.1% in November from a year ago, compared to an increase of 6.3% in the previous month.

However, the risk may be high, after the data on Friday showed that the producer prices increased faster than expected, the concern to burn the CPI report may indicate that inflation is stuck and the interest rate may remain high for a long time.

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Wall Street is down, Treasury yields are ahead and while the dollar has lost previous losses.

In Asia, MSCI’s broad index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1% on Monday, after rising 1.3% last week.

Japan’s Nikkei (.N225) was down 0.5%, while South Korea’s (.KS11) was down 0.7%. S&P 500 futures fell 0.2%, while Nasdaq futures fell 0.3%, as caution reigned supreme.

“This week, the markets could go anywhere… A hot CPI – say 6.4% (and more) and a hawkish set of dots from the Fed and a statement from Powell could see funds call it a day in 2022 – danger comes from -2023 and Funds return short USD,” said Chris Weston, head of research at Pepperstone.

“It would be surprising if we didn’t see the Fed go down 50bp… We want to understand that Jay Powell is opening the door to a slowdown to 25bp walking from February – again, while in line with market prices, this can be taken to be we are near the end of the upward cycle and the USD is negative.”

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Fed policymakers are widely expected to raise rates by 50 basis points on Wednesday at their last meeting of the year, to 4.25% to 4.50%, which would mark the slow pace of rate hikes.

Futures also point to a higher terminal rate of 4.961% next May, and then a drop to 4.488% in December 2023, as markets price in more payments from the Fed as the US economy slows.

In addition to the Fed, the European Central Bank and the Bank of England are also set to announce interest rate hikes, as policymakers continue to put the brakes on growth to curb inflation.

In financial markets, the US dollar ran 0.1% higher against a basket of currencies at 105.01, although it is not far from the five-month high of 104.1 last week.

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Sterling fell 0.2% to $1.2242, while the Aussie fell 0.19% to $0.6783.

Treasury yields held steady on Monday after rallying from three-month lows during the previous session.

The yield on the benchmark 10-year Treasury note held at 3.5875%, compared to its US close of 3.5670%. The two-year yield hit 4.3610%, up slightly from the US close of 4.330%.

The yield curve remains inverted around 77bps, pointing to a possible US recession in the near future.

In the oil market, prices rose more than 1% after falling to their lowest level this year on fears of a global recession.

US West Texas Intermediate (WTI) crude futures rose 1.4% to $72.03 a barrel, while Brent crude settled at $77.15 a barrel, also 1.4% higher.

Spot gold was slightly lower, trading at $1,796.04 per ounce.

Edited by Lincoln Festival.

Our standards: The Thomson Reuters Trust Principles.


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