Asian equities steadied on Wednesday as investors assessed Chinese inflation number and awaits key inflation report in the U.S.
Shares in China and Hong Kong edged higher while other markets including Thailand, Japan and South Korea dipped. The MSCI Asian Index ex Japan dipped by 0.88%.
Contracts on the S&P 500 and Nasdaq 100 rose at least 0.9% each. The dollar fell and Treasury yields slumped.
“A soft inflation read will come as a relief that the Fed doesn’t need to get much more aggressive to bring inflation back towards its 2% policy target,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note.
“If however, inflation hasn’t pulled lower as expected — and worse, if we see a higher figure than last month print — we would see another big wave of selloff.”
The dollar halted a four-day rally and Treasuries rose across the curve, underscoring the risk-on positions before the inflation report. The 10-year rate extended its decline to 20 basis points in the past three days.
The “bar is low” for a surprise from the US data amid ebbing consumer sentiment, according to Brent Schutte, chief investment strategist at Northwestern Mutual Life Insurance Co.
“Things are going to be just a bit better at the margin,” he said. “The Fed overall is going to tighten less. That will lead to a market that begins to find its feet and move higher in coming quarters as inflation does come off the boil.”
Cleveland Fed President Loretta Mester told Bloomberg Television that “we don’t rule out 75 forever,” referring to a more aggressive, three-quarter-point increase.
Oil climbed, with WTI trading above $103 per barrel and Brent trading around $105 a barrel.
