Asian markets becalmed as hot US inflation data

Asian markets becalmed as hot US inflation data

On Wednesday Asian stock markets were becalmed as surges in oil and Chinese factory prices added to worries that a hot US inflation reading could cause policymakers to lift interest rates.

US crude futures rose 1 percent to a two-week high of US $84.97 a barrel in early trade, while Brent futures made a one-week top of $85.35.

Factory gate prices in China have soared 13.5 percent year-on-year to October, beating forecasts and warnings of pressure on supply chains to global consumers.

The Nasdaq logged its first fall in a dozen sessions, with the broadest index of Asia-Pacific shares outside Japan and Japan's Nikkei each dropping 0.2 percent in and Overnight on Wall Street.

Consumer prices are going to go up 5.8 percent year-on-year and even dovish Federal Reserve officials Neel Kashkari and Mary Daly have conceded that it is running hotter for longer than expected, according to US data due at 1330 GMT.

In a note to the NatWest Markets strategists, "I would imagine that now there is officially little doubt left within the Fed that risks around inflation are much more elevated than previously assumed," he said.

Longer-dated bonds had rallied on Tuesday, flattening the Treasury yield curve, as investors seem to be betting on hikes in the next year or so, which is what's going to cause growth and inflation to go up in the years to come.

A firm CPI read can add a bit more fuel to the flattening, according to NatWest analysts. I would argue that a weak CPI number wouldn't be enough to ease markets into thinking that the Fed will hold back. The benchmark 10 year yield was lifted by the dollar by about 2 basis points to 1.4626 percent in Asia hours after it had touched a six-week low of 1.4150 percent overnight.

The yen rose to a one-month high but traders favoured safe havens on Tuesday.

The Japanese currency held there on Wednesday at 112.84 per dollar and risk-sensitive currencies such as the Australian dollar under pressure, with the Aussie testing support at its 50 day moving average of $0.7374.

Chris Weston, head of research at broker Pepperstone in Melbourne, said the dollar will be sensitive to moves in the 2 -- 5 year part of the US Treasury curve.

He said that we need to see a monthly US CPI print of 0.8 percent to see the dollar index break out of the top of the range of 94.50. The index was last at 93.997.

The economic slowdown in China is nagging on investors' minds, especially as a credit crunch seems to be spreading quickly through the giant property industry.

Bonds in the sector had suffered a pounding on Tuesday, with the sell-off dragging in even investment-grade debts.

The market is driven by fear rather than rationale, according to analysts at J.P. Morgan. Valuations have been included in the worst case scenario. Other clouds are brewing with a survey in Japan showing manufacturers' business confidence has fallen to a new seven-month low and Tesla stock, a bit of a gauge of retail investors' sentiment turning wobbly.

The carmaker suffered its lowest share price fall in 14 months on Tuesday as traders brace for a possible sale from company chief Elon Musk, which has been the poster-stock of the thumping rally from pandemic lows.

Gold andbitcoin have been the main beneficiaries of the market turbulence, with gold up 3.5 percent in a week to $1,829 an ounce and a price of $67,267 after hitting a record peak of $68,564 a day ago.