Stocks Eke Out Small Gain in Asia Ahead of Powell: Markets Wrap

(Bloomberg) -- US equity futures and Asian stocks made small advances as investors await commentary from Federal Reserve Chair Jerome Powell later Tuesday amid bets the central bank will keep a firm grip on monetary policy.

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Shares rose in Japan and South Korea while Australia's benchmark index fluctuated. Futures for Hong Kong were little changed and US-listed Chinese companies fell to the lowest in more than two weeks. That came amid a drop US equities Monday, with the S&P 500 and the tech-heavy Nasdaq 100 finishing lower.

Treasuries were little changed Tuesday after a two-day rout sparked by traders ramping up bets on future tightening. That's taken the shine off the best start to a year for cross-asset returns since 1987.

Australian bonds fell in early trading following the moves in the US market and before an interest rate decision from the central bank, which is forecast to hike by 25 basis points.

Investors are weighing whether Powell may emphasize that optimism for rate cuts later in 2023 is probably misplaced. Atlanta Fed President Raphael Bostic said Monday the strong jobs data on Friday raises the possibility that the central bank will need to increase interest rates to a higher peak than policymakers had previously expected.

"Fed Chair Powell remains a big wild card every time he speaks," said Chris Senyek at Wolfe Research. "Investors will be looking to see if he 'walks back' his very dovish tone from last Wednesday, particularly with respect to financial conditions and the US 'disinflationary process.' We still believe that the Fed will be 'higher for longer'."

The yen held most of its losses from Monday after broad gains in the dollar sent a gauge of the greenback up for a third day. Japan unexpectedly reported nominal wages jump in December by the biggest margin in nearly 26 years, stoking market bets that the central bank will adjust or back away from its stimulus program under a new governor.

There also seems to be no quick fix to the stock rout roiling Gautam Adani's indebted conglomerate. The meltdown since US short-seller Hindenburg Research made fraud allegations against the ports-to-power group in a Jan. 24 report has wiped out $117 billion, or almost half of the market value of its companies. Adani has repeatedly denied the claims.

The air of caution in global markets is being reinforced by geopolitical concerns. The US is preparing to impose a 200% tariff on Russian-made aluminum, while the US started to recover some parts from the Chinese balloon that a fighter jet shot down off the coast of South Carolina. Biden administration officials said the US was still trying to figure out how much senior leaders in Beijing knew about the alleged spy mission.

JPMorgan Chase & Co. strategist Marko Kolanovic reiterated that stock investors should fade last week's Fed-induced rally, arguing the US economy's disinflationary process could just be "transitory."

Elsewhere, oil extended gains after Saudi Arabia unexpectedly raised its crude prices to Asia, signaling confidence in the demand outlook. Gold was little changed.

Key events:

• US trade, Tuesday

• Fed Chair Jerome Powell interviewed by David Rubinstein at the Economic Club of Washington, Tuesday

• President Joe Biden delivers the State of the Union address before Congress, Tuesday

• US wholesale inventories, Wednesday

• New York Fed President John Williams is interviewed at Wall Street Journal live event, Wednesday

• US initial jobless claims, Thursday

• ECB President Christine Lagarde participates in EU leaders summit, Thursday

• Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday

• US University of Michigan consumer sentiment, Friday

• Fed's Christopher Waller and Patrick Harker speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 9:31 a.m. Tokyo time. The S&P 500 fell 0.6%

• Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.9%

• Hang Seng futures were little changed

• Japan's Topix rose 0.4%

• Australia's S&P/ASX 200 rose 0.2%

• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0731

• The Japanese yen rose 0.2% to 132.46 per dollar

• The offshore yuan rose 0.1% to 6.7984 per dollar

• The Australian dollar rose 0.1% to $0.6891

Cryptocurrencies

• Bitcoin fell 0.5% to $22,810.45

• Ether fell 1% to $1,621.1

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.63%

• Australia's 10-year yield advanced 10 basis points to 3.56%

Commodities

• West Texas Intermediate crude rose 0.5% to $74.46 a barrel

• Spot gold rose 0.1% to $1,870.02 an ounce

This story was produced with the assistance of Bloomberg Automation.

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