Stocks in Asia made an uneven recovery as higher-than-expected producer price inflation dampened expectations of a jumbo rate cut at the Federal Reserve’s September meeting, while US bonds and equity futures stabilised.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3 per cent after a report on Thursday from the Bureau of Labor Statistics which showed the Producer Price Index increased 0.9 per cent in July on a month-over-month basis, well above economists’ expectations.
“What it did was to get rid of all the chat about a 50 basis point cut,” said Mike Houlahan, director at Electus Financial Ltd in Auckland.
The market is currently pricing in a 92.1 per cent probability of a 25 basis point rate cut at its September meeting, compared with a 100 per cent likelihood of a cut on Thursday, according to the CME Group’s FedWatch tool. The chance of a jumbo 50 basis point cut fell to zero per cent from an earlier expectation of 5.7 per cent a day ago.
US stock futures were flat in early Asian trading after ending a choppy trading session on Wall Street with mild gains on Thursday. The yield on the US 10-year Treasury bond was down 1 basis point at 4.2829 per cent.
The two-year yield, which is sensitive to traders’ expectations of Fed fund rates, slipped to 3.7304 per cent compared with a US close of 3.739 per cent. Nasdaq futures extended losses into a third consecutive day, sliding 0.1 per cent lower.
The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, retraced some gains after the PPI data release, last trading down 0.1 per cent at 98.143.
The Nikkei 225 rebounded 0.4 per cent after snapping a six-day winning streak on Thursday with its biggest one-day selloff since April 11, as Japanese GDP data showed the economy expanding by an annualised 1.0 per cent in the April-June quarter, beating analyst estimates. The dollar weakened 0.3 per cent against the yen to 147.64.
Australian shares were last up 0.2 per cent, while stocks in Hong Kong were down 0.9 per cent following losses on Thursday for US-listed exchange-traded funds tracking Chinese companies.
The CSI 300 gave up early gains and was last trading flat after the release of weaker-than-expected Chinese economic data for July including retail sales and industrial production.
Markets in India and South Korea are closed for public holidays.
Cryptocurrency markets stabilised after a new record for bitcoin of $US124,480.82 ($A191,777.05) on Thursday proved fragile and promptly crumbled after falling short of its next key milestone. The digital currency was last up 0.7 per cent, recovering some ground, while ether gained 1.7 per cent.
“Bitcoin’s failure to conquer the $US125,000 ($A192,577) resistance signals another consolidation phase,” said Tony Sycamore, a market analyst at IG in Sydney.
In commodities markets, Brent crude was flat at $US66.94 ($A103.13) per barrel ahead of a meeting in Alaska between US President Donald Trump and Russian leader Vladimir Putin.
Gold was slightly lower as the markets digested the path of inflation-adjusted interest rates, which typically move in the opposite direction from bullion prices. Spot gold was trading up 0.1 per cent at $US3,339 ($A5,144) per ounce.
In early European trades, the pan-region futures were up 0.4 per cent, German DAX futures were up 0.3 per cent at 24,489, and FTSE futures were up 0.5 per cent.
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