Asian futures rise as Wall Street remains cautious: Markets are mixed

(Bloomberg) — Asian stocks are poised to rise as traders look to Japan for clues about markets reopening after a holiday. Risk appetite was subdued in the US session due to concern over geopolitical risks.

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Japanese stock futures rose moderately, with a weaker yen seen as support for exporters, while Hong Kong contracts also rose. The S&P 500 closed flat as investors awaited key US economic data later this week.

Oil hit $80 on Monday while Treasury bonds rose as the US considers an Iranian attack on Israel increasingly likely. Israel’s sovereign debt was cut by one notch by Fitch Ratings, which maintained a negative outlook on credit as continued military conflict weighs on the country’s public finances.

“Volatility could return this week,” said Solita Marcelli of UBS Global Wealth Management. “If inflation is too low, this could increase concerns that the US could be heading towards a recession. If inflation is too high, it could encourage fears that the Federal Reserve may be unable to cut rates quickly enough to protect the economy. Geopolitical risks also remain high.”

After last week’s turmoil, markets will be focused on Wednesday’s consumer price index to see whether the Fed will have a freer or tighter hand in refocusing on the labor market and bringing forward enough rate cuts to ensure a “soft landing,” according to Krishna Guha at Evercore.

“But don’t panic if the CPI is on the warmer side,” Guha noted. “This is now a labor data-first Fed, not an inflation data-first Fed, which is less data-dependent and more forward-looking. We believe that if upcoming labor data remains weak, the Fed will still be inclined to make cuts.”

Elsewhere in Asia, regulators told commercial banks in China’s Jiangxi province not to liquidate their government bond purchases, taking some of the most extreme measures yet to cool a market rally that has alarmed Beijing. At least four Chinese brokerages began new measures to reduce domestic debt trading starting last week, people familiar with the matter said.

Meanwhile, India’s inflation fell below the central bank’s target for the first time in nearly five years, although it is unlikely to spur interest rate cuts as policymakers want to see a sustained decline in prices.

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Risk-Reward

The risk-reward balance for stock markets remains mixed during the summer months amid weakening business activity and negative earnings revisions, according to JPMorgan Chase & Co. strategists led by Mislav Matejka.

“The Fed will begin cutting, but this may not lead to a sustained increase as the cuts may be seen as reactive and delayed,” they wrote.

Investors will have a brief window to buy the dip in U.S. stocks later this month as selling pressure from systematic funds eases while companies increase share repurchases, according to Scott Rubner of Goldman Sachs Group Inc.

Further declines in the short term cannot be ruled out if activity data surprises negatively, but investors should buy shares in case of weakness as fundamentals still support risky assets, say HSBC strategists.

Main events this week:

• Expectations from Germany’s ZEW survey, Tuesday

• US PPI, Tuesday

• Fed’s Raphael Bostic speaks on Tuesday

• Eurozone GDP, industrial production, Wednesday

• US CPI Wednesday

• China home prices, retail sales, industrial production, Thursday

• U.S. initial unemployment claims, retail sales, industrial production, Thursday

• Fed’s Alberto Musalem and Patrick Harker speak on Thursday

• US Housing Starts, University of Michigan Consumer Sentiment, Friday

• Fed’s Austan Goolsbee Speaks on Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were little changed as of 8:49 a.m. Tokyo time

• Hang Seng futures rose 0.4%

• S&P/ASX 200 futures remained unchanged

Coins

• The Bloomberg Dollar Spot index was little changed

• The euro was little changed at $1.0935

• The Japanese yen rose 0.1% to 147.01 per dollar

• The offshore yuan was unchanged at 7.1784 per dollar

• The Australian dollar was little changed at $0.6585

Cryptocurrencies

• Bitcoin rose 0.9% to $59,362.75

• Ether rose 1.9% to $2,732.52

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This story was produced with help from Bloomberg Automation.

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