Stocks set for steady start as earnings, CPI loom

Stocks set for steady start as earnings, CPI loom
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(Oct 13): Asian stocks looked set for a steady start Wednesday as traders weigh the impact of elevated inflation on the economic recovery and await earnings reports. Longer term Treasury yields declined.

Futures for Japan, Australia and Hong Kong edged up. U.S. contracts fell after the S&P 500 and Nasdaq 100 dropped, with investors waiting to see whether the profit outlook can repair sentiment. Apple Inc. slipped in late trading on a likely cut in 2021 iPhone 13 output targets due to chip shortages, putting the focus on the supply-chain snarls shadowing the reopening from the pandemic.

The U.S. 10-year Treasury yield retreated, aided by solid demand at an auction, while the yield curve flattened. The dollar was little changed. Markets are awaiting a U.S. CPI report that is expected to show inflation remained elevated. A rally in crude oil amid a global energy crunch paused.

In China, concerns are mounting about contagion among indebted developers. Sinic Holdings Group Co. has become the latest real-estate firm to warn of imminent default.

The upcoming flurry of corporate earnings releases will provide a window on whether businesses expect price pressures to crimp profit margins. A backdrop of slowing economic growth and elevated inflation, just as key central banks prepare to pare stimulus, is causing investor jitters.

“Earnings season is going to give us a really good clue of where we’re going on some of these supply issues,” Alicia Levine, head of equities and capital market advisory at BNY Mellon Wealth Management, told Bloomberg TV. “The two sectors we worry about are the industrials and retail, because that’s where the companies are not able to pass along prices as easily.”

Meanwhile, Federal Reserve Bank of Atlanta President Raphael Bostic said the inflation surge is lasting longer than officials expected, so it’s not appropriate to refer to such a rise as transitory. Vice Chair Richard Clarida noted that the conditions required to begin tapering the Fed’s bond-buying program have “all but been met.”

The International Monetary Fund warned of the risk of sudden and steep declines in global equity prices and home values as global central banks withdraw the support they’ve provided during the pandemic.

In cryptocurrencies, Bitcoin pared its recent rally and traded around US$56,200.

Here are a few events to watch this week:

  • U.S. FOMC minutes and CPI Wednesday
  • China PPI, CPI Thursday
  • U.S. initial jobless claims, PPI Thursday

Stocks

  • S&P 500 futures fell 0.2% as of 7:30 a.m in Tokyo. The S&P 500 fell 0.2%
  • Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.4%
  • Nikkei 225 futures rose 0.3%
  • Australia’s S&P/ASX 200 Index futures added 0.2%
  • Hang Seng Index futures gained 0.2%

Currencies

  • The Japanese yen was at 113.61 per dollar
  • The offshore yuan traded at 6.4564 per dollar
  • The Bloomberg Dollar Spot Index was little changed
  • The euro traded at US$1.1533

Bonds

  • The yield on 10-year Treasuries declined four basis points to 1.58%
  • Australia’s 10-year bond yield fell about two basis points to 1.71%

Commodities

  • West Texas Intermediate crude was was US$80.42 a barrel, down 0.3%
  • Gold was at US$1,760.65 an ounce