Stocks set to drop; Treasuries rallied after CPI

Stocks set to drop; Treasuries rallied after CPI
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(Sept 15): Asian stocks look set to fall Wednesday after Wall Street slipped on growth concerns, while Treasuries rallied in the wake of an inflation report that suggested the Federal Reserve won’t rush to taper stimulus.

Equity futures slid in Japan, Australia and Hong Kong. U.S. contracts were steady after the S&P 500 and Nasdaq 100 both retreated overnight. The benchmark 10-year Treasury yield fell below 1.3%, narrowing the yield gap between short- and longer-maturity U.S. debt. The dollar was steady and gold held a climb.

U.S. inflation was less than forecast in August, supporting the view that pandemic-related price pressures could be transitory but leaving the overall argument undecided. A gauge of commodity prices remains around a decade-high, underscoring the rise in costs filtering across the global economy.

In China, investors are awaiting economic data that are likely to show the damage done from a Covid-19 outbreak. Traders are also monitoring Beijing’s regulatory curbs and the debt woes of developer China Evergrande Group.

While the inflation print could be seen as easing pressure on the Fed to start pulling back on loose monetary policy, investors remain concerned about the impact of the delta virus variant on economic reopening. Fund managers are souring on global growth and earnings but won’t give up on stocks, the latest Bank of America survey showed.

“Although the August CPI report all but guarantees no taper announcement at next week’s FOMC meeting, the clear and present danger is around a slowing economy,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors.

Here are some events to watch this week:

  • China retail sales, property prices, industrial production, Wednesday
  • Quadruple witching day for U.S. markets, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 7:01 a.m. in Tokyo. The S&P 500 fell 0.6%
  • Nasdaq 100 futures added 0.1%. The Nasdaq 100 fell 0.3%
  • Nikkei 225 futures fell 0.8%
  • Australia’s S&P/ASX 200 Index futures dropped 0.5%
  • Hang Seng Index futures lost 0.5% earlier

Currencies

  • The Japanese yen traded at 109.71 per dollar
  • The offshore yuan was at 6.4373 per dollar
  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at US$1.1807

Bonds

  • The yield on 10-year Treasuries declined four basis points to 1.28%

Commodities

  • West Texas Intermediate crude was at US$70.74 a barrel
  • Gold was at US$1,804.18 an ounce