By Wayne Cole

SYDNEY (Reuters) – Asian stocks got a cautious start on Monday to a week when interest rates are sure to rise in Europe and the United States, along with US jobs and wages data that could affect how far they have to go.

Earnings from a who’s who of tech giants will also test Wall Street bulls looking to push the Nasdaq to its best January since 2001.

Asia was not sluggish either, with China’s swift reopening bolstering the economic outlook, with MSCI’s broadest index of Asia-Pacific stocks outside of Japan rising 11% to a nine-month high in January.

Early Monday, the index rose 0.1% as investors looked forward to the Chinese market’s rebound after the Lunar New Year holiday, while Japan’s Nikkei rose 0.2%.

S&P 500 futures and Nasdaq futures both fell 0.1%.

Investors are confident that the Federal Reserve will hike rates by 25 basis points on Wednesday, followed by a half-point hike by the Bank of England and the European Central Bank the following day, and any deviation from that script would come as a real shock .

Equally important will be the guidance for future policy, as analysts expect hawkish inflationary news is not yet over and more needs to be done.

“With US job markets still tight, core inflation high and financial conditions easing, Fed Chair Powell’s tone will be hawkish, emphasizing that a downgrade to a 25 basis point hike doesn’t mean a pause is coming ‘ said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.

“We also expect him to continue cracking down on market pricing for rate cuts later this year.”

There is work to be done as futures rates currently peak at 5.0% in March only to fall back to 4.5% by the end of the year.

EYEING APPLE

Yields on 10-year notes are down 31 basis points to 3.518% so far this month, essentially easing financial conditions even as the Fed looks to tighten.

This dovish outlook is also being tested by data on US payrolls, the employment cost index and various ISM surveys.

As for Wall Street’s recent rally, much will depend on gains from Apple Inc, Amazon.com, Alphabet Inc and Meta Platforms, among many others.

“Apple will provide an insight into the overall demand history for consumers worldwide and provide a snapshot of China supply chain issues that are beginning to ease,” analysts at Wedbush wrote.

“Based on our recent supply chain reviews in Asia, we believe demand for the iPhone 14 Pro is stronger than expected,” they added. “Apple will likely cut some costs on the fringes, but we don’t expect any mass layoffs.”

Market pricing for the Fed’s early easing has weighed on the dollar, which is down 1.5% against a basket of major currencies so far this month.

The euro is up 1.4% in January to $1.0870, just below a nine-month high. The dollar is even down 1% against the yen to 129.92, despite the Bank of Japan’s dogged defense of its super-loose policy.

The decline in the dollar and yields has been a boon for gold, which is up 5.6% month to date to $1,928 an ounce. [GOL/]

China’s quick reopening is seen as a boon for commodities in general, supporting everything from copper to iron ore to oil prices. [O/R]

Beijing reported that Lunar New Year travel within China rose 74% year-on-year, although that was still only half of pre-pandemic levels.

Early Monday, Brent was up 79 cents at $87.45 a barrel, while US crude was up 66 cents at $80.34.

By Kantaro Komiya

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida said on Friday that a return to deflation in the world’s third-largest economy cannot be ruled out, because domestic demand remains weak.

The comment came hours after data showed Tokyo’s consumer inflation, a leading indicator of Japanese price trends, hit a 42-year high in January, keeping the central bank under pressure to phase out its easy monetary policy.

However, Kishida told a session of the upper house of parliament that inflation was being driven by high global raw material prices and a weak yen, not by strong domestic demand.

Asked by an opposition lawmaker if the Japanese economy has fully exited from years of deflation, Kishida said: “the state of non-deflation is going on at the moment, but it has not reached a stage where we can judge that the return (to deflation) is unlikely.”

The Bank of Japan (BOJ) surprised financial markets last month with a decision to allow 10-year bond yields to move in a slightly wider range at just above or below zero, prompting speculation it was preparing the ground for a gradual exit from its super-loose policy.

But Kishida described the move as an operational tweak to smooth the impact of monetary easing, which is distorting the country’s bond markets. The BOJ did not make further changes at its mid-January meeting.

Policymakers are hoping that wage increases this spring will cushion higher living costs and boost consumer spending.

“The government and the BOJ have agreed to closely cooperate towards economic growth in tandem with structural wage hikes and the sustainable, stable achievement of the inflation target,” Kishida said, reiterating his previous remarks.

He also refrained from commenting on whether there would be a revision to a joint government and BOJ statement on economic policy that has mandated policymakers to fight deflation since 2013, saying that a new BOJ governor has not yet been chosen.

Kishida on Sunday said he would nominate the next BOJ leader next month before the incumbent Haruhiko Kuroda’s second five-year term expires on April 8.

(Reporting by Kantaro Komiya; Editing by Jacqueline Wong and Kim Coghill)

NEW YORK: The S&P 500 ended nominally lower on Wednesday as a string of corporate earnings ran the gamut from downbeat to dismal, reviving worries over the economic impact of the US Federal Reserve’s restrictive policy.

All three major US stock indexes pared their losses throughout the afternoon to close well off session lows, with the blue-chip Dow eking out a small gain in the final minutes.

The tech-laden Nasdaq was weighed down after Microsoft Corp, the first major technology firm to post quarterly results, offered dour guidance and raised red flags with respect to its megacap peers which have yet to report.

“We’ve had up and down days, that indicates an ongoing tug-of-war,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “The dour guidance good news from the standpoint of what the Fed is doing is working.”

“That outcome has become the catalyst for the market one way or the other,” Carlson added. “Earnings matter but what’s really got the market’s focus is the Fed interest rate/inflation story.”

Fourth-quarter earnings season has shifted into overdrive, with 95 of the companies in the S&P 500 having reported. Of those, 67% have beat consensus estimates, well below the 76% average beat rate over the past four quarters, according to Refintiv.

Analysts now see aggregate S&P 500 earnings dropping 3.0% year-on-year, nearly double the 1.6% drop seen on Jan. 1, per Refinitiv.

The Dow Jones Industrial Average rose 9.88 points, or 0.03%, to 33,743.84, the S&P 500 lost 0.73 points, or 0.02%, to 4,016.22 and the Nasdaq Composite dropped 20.92 points, or 0.18%, to 11,313.36.

Five of the 11 major sectors of the S&P 500 ended lower, with utilities suffering the largest percentage loss.

Abbott Laboratories dropped 1.4%, as weaker-than-expected medical device sales weighed on the stock.

Among gainers, News Corp jumped 5.7% after Rupert Murdoch withdrew a proposal to reunite News Corp and Fox Corp.

AT&T Inc also delivered disappointing guidance but its renewed focus on its telecoms business helped boost subscriber numbers, sending its shares up 6.6%.

General Dynamics Corp beat quarterly expectations, but a weak 2023 forecast helped send the defense contractor’s shares sliding 3.6%.

Shares of Tesla Inc whipsawed in extended trading after the electric automaker beat fourth quarter-revenue estimates.

IBM advanced after hours in the wake of posting its highest annual revenue growth in a decade.

Shares of Levi Strauss & Co jumped more than 6%in extended trade after the jeans maker provided upbeat 2023 guidance.

Finally, in a post-script to Tuesday’s technical glitch which halted the opening auctions for a spate of stocks and prompted a review by the U.S. Securities and Exchange Commission (SEC), the New York Stock Exchange (NYSE) said a manual error resulted in the snafu which caused widespread confusion at the opening bell.

Advancing issues outnumbered declining ones on the NYSE by a 1.25-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored advancers.

The S&P 500 posted 8 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 61 new highs and 30 new lows.

Volume on US exchanges was 10.89 billion shares, compared with the 10.78 billion average over the last 20 trading days. — Reuters

By Ambar Warrick 

Investing.com– Oil prices rose on Wednesday, recovering a measure of sharp losses from the prior session, although fears of a global recession and signs of another major build in U.S. inventories kept gains limited. 

Crude prices have fallen into a holding pattern over the past month, with markets constantly weighing the prospect of slowing global economic growth against signs of an improvement in Chinese demand this year. 

While the world’s largest oil importer relaxed anti-COVID measures earlier this month, a raft of weakening economic indicators in other major oil markets, particularly the U.S. and Europe, have sapped optimism over crude markets.

Brent oil futures rose 0.4% to $86.68 a barrel, while West Texas Intermediate crude futures rose 0.5% to $80.53 a barrel by 21:22 ET (02:22 GMT). Both contracts plummeted nearly 2% on Tuesday.

Crude’s sharp fall was triggered by data showing that U.S. manufacturing activity shrank in January for the seventh straight month, ramping up concerns over slowing activity in the world’s largest oil consumer. 

Data from the American Petroleum Institute also pointed to a bigger-than-expected 3.4 million barrel build in U.S. crude inventories in the week to January 20. The reading usually heralds a similar trend in government data, which is due later in the day. Analysts are forecasting a 0.9 million barrel build in U.S. inventories, which have grown more than expected for the past four weeks.

Growth in U.S. inventories indicates that the market is expected to remain flush with supply in the near-term, which is negative for oil prices. But a sustained drop in distillate inventories has shown that some facets of crude demand in the country remain strong.

Focus is now on U.S. fourth quarter GDP data due on Thursday, which is expected to provide more clarity on the path of the world’s biggest economy. 

Markets are also growing uncertain over the timing of a Chinese economic recovery this year. While the country scaled back most anti-COVID restrictions, it is also grappling with its worst yet COVID-19 outbreak, which could potentially delay an economic recovery. 

Reports this week also suggested that the Organization of Petroleum Exporting Countries is not considering any cuts to supply at its next meeting, which is expected to keep global markets flush with crude in the near-term. Investment bank JPMorgan (NYSE:JPM) said in a recent note that crude supply is likely to surpass demand in 2023, which will limit any major upside in prices. 

Federal Reserve policymakers on Wednesday signalled they will push on with more interest rate hikes, with several supporting a top policy rate of at least 5% even as inflation shows signs of having peaked and economic activity is slowing.

“I just think we need to keep going, and we’ll discuss at the meeting how much to do,” Cleveland Fed President Loretta Mester said in an interview with the Associated Press.

The remarks appeared to reflect a widely shared view among her fellow policymakers, most of whom as of December had pencilled in a 5.00%-5.25% policy rate in coming months.

Mester said that for her part she expects the Fed’s policy rate to need to go “a bit higher” than that, and stay there for some time to further slow inflation.

The Fed’s benchmark overnight lending rate currently sits in a target range of 4.25% to 4.50%, and investors expect the Fed to lift that rate by a quarter of a percentage point at the end of its Jan. 31-Feb. 1 meeting, Reuters reported.

But slowing spending, inflation, and manufacturing – all reported earlier on Wednesday – have helped stoke expectations that the Fed will end its current round of rate hikes sooner than Mester and most of her colleagues expect, with the policy rate just shy of 5%.

The central bank began raising borrowing costs last March, when the policy rate was in the 0%-0.25% range and inflation was starting to make a climb that would see it rise to 40-year highs, several times the Fed’s 2% target.

‘WHY STALL?’

Like Mester, St. Louis Fed President James Bullard, speaking with the Wall Street Journal earlier, said he too sees the policy rate rising to the 5.25%-5.50% range, and added that policymakers should get it above 5% “as quickly as we can.”

Several Fed officials have expressed support for slowing to quarter-percentage-point rate increases, after last year’s much faster pace of rate hikes in mostly 75-basis point and half-point increments.

Bullard expressed more impatience. Asked if he was open to a half-percentage-point increase at the Fed’s upcoming meeting, he asked “why not go to where we’re supposed to go? … Why stall?”

The answer may in part be found in the latest “Beige Book” report published by the Fed on Wednesday. The compilation of survey data from the central bank’s districts around the country showed that while prices continued to increase, the pace in most districts was reported to have slowed.

And while employment continued to grow at a “modest to moderate” pace in much of the country, and several Fed districts reported modest economic growth, the New York Fed reported a contraction in activity, four other districts reported slowdowns or slight declines, and most expected little growth ahead.

Still, Fed policymakers say the mistake they do not want to make is to stop short of defeating inflation, only to have to raise rates even more to do the job later on, as happened in the 1970s and 1980s

Even Philadelphia Fed President Patrick Harker, who is generally less hawkish than Mester or Bullard and wants the Fed to switch to quarter-percentage-point hikes ahead, sees “a few more” rises in borrowing costs before a pause.

Dallas Fed President Lorie Logan also supports a slower rate hike pace ahead because of the uncertain outlook and the need to be flexible. But she also signaled the Fed may need to raise rates higher than is widely expected to keep financial conditions tight enough to press down on inflation.

“I believe we shouldn’t lock in on a peak interest rate,” Logan said in Austin, Texas. She added that even once inflation is headed convincingly down to 2% and the Fed does stop raising rates, the risks will be “two-sided” and that further rate hikes could be in the offing.

In an interview with Reuters on Wednesday, outgoing Kansas City Fed President Esther George said she felt rates would have to move higher than many of her colleagues anticipate, but that she also would have been willing to move in smaller increments.

“People’s expectations about inflation are beginning to move down,” George said, an observation based on conversations with contacts in her Midwest district. “So I’m comfortable beginning that stepped-down process … I’d be happy to do 25s if I were there.”

George will retire right before the Fed’s next meeting and will not participate in it.

But she added, “we still have upside risk to inflation. I don’t think I’ve reached a point where I think it is clearly falling. There are enough issues out there to say we have to guard against them.”

Fed Chair Jerome Powell, who tested positive for COVID-19 on Wednesday and is experiencing mild symptoms from the virus, said after last month’s policy meeting that the inflation battle had not been won and that more rate hikes were coming in 2023.

A batch of top-tier economic data from China, including fourth quarter GDP growth, will grab the spotlight in Asia on Tuesday, and the numbers are not expected to be pretty.(YCC) bands following December’s surprise tweak.The land of rising yields is the No.Add a Comment Comment Guidelines We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other.

This does not necessarily mean investor sentiment and risky assets will automatically weaken – investors may consider these figures to be backward-looking, or bet that they will spur growth-friendly stimulus and policies from Beijing.Either way, it does look like Q4 GDP, as well as December retail sales, investment and industrial production data will confirm the world’s second-largest economy ended last year on an extremely weak footing.50% from 0.To varying degrees, all are expected to be softer than the previous measures.Citibank strategist Ebrahim Rahbari said that in the series of predicting historically unpredictable events, following the world’s most forecasted recession, markets were now dealing with another: “a likely BoJ YCC change.GDP is 0.55% last week, forcing the BOJ to ramp up its already massive quantities of bond purchases.8% from Q3, giving annual growth of just 1.Even negative opinions can be framed positively and diplomatically.

8% in the October-December period.The yen has been on a tear recently.In Europe, the World Economic Forum’ annual winter shindig in the Swiss mountain resort kicks off on Monday , marking a return for glitzy parties and high-minded debates following a three-year hiatus.Retail sales are expected to have fallen 8.6%.50 per dollar, a far cry from October’s low of 151.chart Economists polled by Reuters reckon China’s economy grew 2.S.8% last year overall, and will rebound to 4.China’s yuan also has been surging against the beleaguered dollar on soaring optimism surrounding the country’s reopening now that Beijing has ditched its zero-COVID policy.Comments that are written in all caps and contain excessive use of symbols will be removed.

9% this year.The transition away from the stringent zero-COVID policy of the last couple of years will be rocky in the near term as infections surge.70 per dollar on Friday, its strongest since early July.A final read of euro zone inflation for December, as well as readings from Britain, Canada and Japan are due.Authorities said on Saturday nearly 60,000 people with COVID died in hospitals between Dec.8 and Jan.All are expected to be weaker than the previous prints but investors are hoping this marks the economic nadir.12.In addition, any of the above-mentioned violations may result in suspension of your account.

Analysts at UBS have tried to quantify the impact China’s reopening has had on markets as investors price in the coming recovery.75%.They reckon it accounts for about half of the 70% of the recent market rally that can be attributed to macro factors.In other words, it is about 50% to 70% priced in already, they estimate.25% by March.House price data on Monday showed the sector continued to weaken into December as new COVID-19 outbreaks hit demand.New home prices fell month-on-month for a fifth month in a row, and year-on-year prices fell for an eighth straight month.00%.We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view.

Perhaps unsurprisingly, the yuan on Monday posted its biggest fall since late November.Perhaps it was due a breather, having rallied nearly 10% in the three months from early November to a seven-month high.50% by May, while Morgan Stanley’s team reckons this will be the last hike of the cycle.Meanwhile, the saga at embattled Chinese property developer took another twist on Monday when it was confirmed that its auditor PricewaterhouseCoopers had resigned over matters related to the 2021 fiscal year.Three key developments that could provide more direction to markets on Tuesday: – China GDP (Q4), retail sales, industrial output, investment (December) – World Economic Forum (Davos, Switzerland) – Fed’s Williams speaks Reporting by Jamie McGeever in Orlando, Fla.

SYDNEY (Reuters) – Asian shares started cautiously on Monday as investors waited nervously to see if the Bank of Japan (BOJ) will defend its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.

There were even rumours the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling.

That had markets in an anxious mood and Japan’s Nikkei slipped 0.9% in early trading.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.

S&P 500 futures and Nasdaq futures both eased 0.1%, following a Wall Street bounce last week.

Earnings season gathers steam this week with Goldman Sachs, Morgan Stanley and the first big tech name, Netflix, among those reporting.

World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos and there are a host of central bankers speaking, including no less than nine members of the U.S. Federal Reserve.

The BOJ’s official two-day meeting ends Wednesday and speculation is rife it will have to make changes to its yield curve control (YCC) policy given the market had pushed 10-year yields above its new ceiling of 0.5%.

The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet yields still ended the session up at 0.51%.

However, it did try to get ahead of speculative sellers by announcing it would do another emergency round today, suggesting it was determined to defend its yield policy at least for now.

“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” said analysts at JPMorgan in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”

“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added. “Thus, we think the economic environment does not strongly support consecutive policy changes.”

THE YEN UN-ANCHORED

The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down on the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and likely see the yen surge.

The dollar is already at its lowest since May at 128.03 yen, having shed 3.2% last week, and threatens to break major support around 126.37.

The euro also lost 1.5% on the yen last week, but was aided by gains on a broadly softer dollar which saw it stand at $1.0826 on Monday and just off a nine-month peak.

The dollar has been undermined by falling U.S. bond yields as market wager the Federal Reserve can be less aggressive in hiking rates given inflation has clearly turned the corner.

Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.

Yields on 10-year Treasuries are down at 3.51% having fallen 6 basis points last week to come close to its December trough, and major chart target, of 3.402%.

Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock which increases the chance of a soft landing for the U.S. economy.

“The lower inflation itself encourages a soft-landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” said Ruskin.

“A soft-landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite.”

The drop in yields and the dollar has benefited gold, which jumped 2.9% last week to the highest since April and was last trading at $1,918 an ounce. [GOL/]

Oil prices also rallied last week on hopes the speedy reopening of China would boost demand. Data on mobility, traffic and transport trips in China have shown a sharp revival in movement ahead of the Lunar New Year holidays next week. [O/R]

Chinese data on economic growth, retail sales and industrial output due this week are certain to be dismal, but markets will likely look past that to a rapid recovery now coronavirus restrictions have been dropped.

Early on Monday, Brent was up 8 cents at $85.36 a barrel, while U.S. crude rose 10 cents to $79.96.

($1 = 127.8000 yen)

WASHINGTON (Reuters) – U.S consumer prices fell for the first time in more than 2-1/2 years in December as gasoline and motor vehicles prices declined, offering hope that inflation was now on a sustained downward trend, though the labor market remains tight.

Americans also got more relief at the supermarket last month, with the report from the Labor Department on Thursday showing food prices posting their smallest monthly increase since March 2021. But rents remained very high and utilities were more expensive.

Cooling inflation could allow the Federal Reserve to further scale back the pace of its interest rate increases next month. The U.S. central bank is engaged in its fastest rate hiking cycle since the 1980s. Fed officials welcomed the slowdown, with the Philadelphia Fed’s Patrick Harker saying “hikes of 25 basis points will be appropriate going forward,” in his view.

“The mountain peak of inflation is behind us but the question is how steep the downhill is,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. “To be sure, the efforts by the Fed have begun to bear fruit, even though it will be a while before the promised land of a 2% inflation rate is here.”

The consumer price index dipped 0.1% last month, the first decline since May 2020, when the economy was reeling from the first wave of COVID-19 cases. The CPI rose 0.1% in November.

Economists polled by Reuters had forecast the CPI unchanged. It was third straight month that the CPI came in below expectations and raised buying power for consumers as well as hopes the economy could avoid a dreaded recession this year.

Excluding food, shelter and energy, prices dropped for a third consecutive month.

“Today’s report increases the likelihood of a soft landing,” said Sinem Buber, lead economist at ZipRecruiter.

Gasoline prices tumbled 9.4% after dropping 2.0% in November. But the cost of natural gas increased 3.0%, while electricity rose 1.0%.

Food prices climbed 0.3%, the smallest gain in nearly two years, after rising 0.5% in the prior month. The cost of food consumed at home increased 0.2%, also the least since March 2021. Fruit and vegetable prices fell as did those for dairy products, but meat, poultry and fish cost more. Egg prices surged 11.1% because of avian flu.

In the 12 months through December, the CPI increased 6.5%. That was the smallest rise since October 2021 and followed a 7.1% advance in November. The annual CPI peaked at 9.1% in June, which was the biggest increase since November 1981. Inflation remains well above the Fed’s 2% target.

President Joe Biden said the disinflationary trend was “giving families some real breathing room,” and “proof that my plan is working.”

Price pressures are subsiding as higher borrowing costs cool demand, and supply chains ease.

The Fed last year raised its policy rate by 425 basis points from near zero to a 4.25%-4.50% range, the highest since late 2007. In December, it projected at least an additional 75 basis points of hikes in borrowing costs by the end of 2023.

Financial markets have priced in a 25-basis point rate increase at the Fed’s Jan. 31-Feb. 1 meeting, according to CME’s FedWatch Tool.

Excluding the volatile food and energy components, the CPI climbed 0.3% last month after rising 0.2% in November. In the 12 months through December, the so-called core CPI increased 5.7%. That was the smallest gain since December 2021 and followed a 6.0% advance in November.

Stocks on Wall Street rose. The dollar slipped against a basket of currencies. U.S. Treasury yields fell.

GOODS DEFLATION

Prices for used cars and trucks fell 2.5%, recording their sixth straight monthly decline. New motor vehicles slipped 0.1%, falling for the first time since January 2021.

Core goods prices dropped 0.3%, declining for a third straight month. Apparel prices rose despite retailers offering discounts to clear excess inventory. While goods deflation is becoming entrenched, services, the largest component of the CPI basket, accelerated 0.6% after gaining 0.3% in November.

Core services, which exclude energy, rose 0.5% last month after increasing 0.4% in November.

They are being driven by sticky rents. Owners’ equivalent rent, a measure of the amount homeowners would pay to rent or would earn from renting their property, jumped 0.8% after rising 0.7% in November. Independent measures, however, suggest rental inflation is cooling.

The rent measures in the CPI tend to lag the independent gauges. Healthcare costs gained 0.1% after two straight monthly declines. Stripping out rental shelter, services inflation shot up 0.4% after being unchanged in November.

With labor costs accounting for about two-thirds of the CPI, Fed officials will want to see more compelling evidence of abating prices pressures before pausing rate hikes.

The labor market remains tight, with the unemployment rate back at a five-decade low of 3.5% in December, and 1.7 jobs for every unemployed person in November.

A separate report from the Labor Department showed initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 205,000 for the week ended Jan. 7.

Economists had forecast 215,000 claims for the latest week. Claims have remained low despite high-profile layoffs in the technology industry as well as job cuts in interest rate-sensitive sectors like finance and housing.

Economists say companies are for now reluctant to send workers home after difficulties finding labor during the pandemic. The number of people receiving benefits after an initial week of aid, a proxy for hiring, dropped 63,000 to 1.634 million in the week ending Dec. 31, the claims data showed

The government reported last week the economy created 223,000 jobs in December, more than double the 100,000 that the Fed wants to see to be confident inflation is cooling.

“Even if the Fed delivers a downshift in pace, it will continue tightening past its next meeting,” said Michael Pugliese, an economist at Wells Fargo in New York.

SINGAPORE (Reuters) – Asian stock markets mostly pushed higher on Thursday, ahead of U.S. consumer price data that investors hope will confirm inflation is in retreat, while the yen rose with a report Japan will next week review the side-effects of its ultra-easy policy.

Following gains for Wall Street indexes overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5% and touched an almost seven-month high.

Japan’s Nikkei wobbled 0.2% lower. Bonds were bought around the world overnight and the U.S. dollar wavered, to touch a seven-month low at $1.0776 per euro.

Due at 1330 GMT, economists expect the rise in core U.S. consumer prices slowed to an annual pace of 5.7% in December, from 6% a month earlier. Month-on-month headline inflation is seen at zero.

The hope is that falling inflation reduces the need for interest rate hikes, and markets have priced better-than-even odds that the Federal Reserve slows its cracking pace and hikes by 25 basis points, rather than 50, at next month’s meeting.

“(It) is the CPI number that could help settle the debate for the February meeting,” said NatWest Markets’ U.S. rates strategist Jan Nevruzi.

“We expect a below consensus CPI print, which if it materialises, could push this rally even further.”

Boston Federal Reserve bank leader Susan Collins also helped things, remarking to the New York Times that she was leaning towards a 25 basis point hike.

Optimism for a more benign rates outlook and a pickup in demand as China emerges from strict COVID restrictions also drove oil prices sharply higher to one-week peaks. [O/R]

Brent crude futures rose more than 3% to $83 a barrel overnight. U.S. Treasuries rallied at the longer end of the curve, with benchmark 10-year yields down 6 bps to 3.5558% and 30-year yields down 7 bps to 3.6874%.

European rate expectations also pulled back a little.

CHINA HOPES

Against hopes for gentler central banks in the West, investors are also hoping recovery in China can help global growth and are eyeing a potential policy shift in Japan.

The Bank of Japan stunned markets last month by widening the band around its 10-year bond yield target, a move that triggered a sudden rise in yields and a jump in the yen.

On Thursday Japan’s Yomiuri newspaper reported the BOJ will review of the side-effects of Japan’s ultra-easy settings at next week’s policy meetings, and that it may take additional steps to correct distortions in the yield curve.

Uniqlo parent Fast Retailing on Wednesday also gave inflation expectations something of a jolt in Japan by announcing plans for wages hikes of as much as 40%.

BOJ Governor Haruhiko Kuroda is due to make remarks later in the day. The yen rose about 0.5% in otherwise quiet currency trade to 131.84 per dollar. Japanese government bond futures fell to almost eight-year lows. [JP/]

Foreign exchange markets were elsewhere holding their breath ahead of CPI data while China’s reopening kept a bid under Asia’s currencies. The yuan hit a five-month high of 6.7532 in offshore trade. The Aussie held above $0.69.

China on Thursday reported consumer price falls in December and a larger-than-expected drop in factory gate prices – underscoring the weakness in demand that investors are betting will recover over the coming months.

“It’s not enough for China to come out of COVID to really turn the whole world economy around,” said Steven Wieting, chief investment strategist and chief economist at Citi Global Wealth Investments. “But it really weighs in the opposite direction.”

Inflation data is also due in India later on Thursday, where hopes are it will steady below 6%.

NEW YORK: US stocks ended solidly higher on Tuesday, led by a 1% gain in the Nasdaq, on relief that Federal Reserve chair Jerome Powell refrained in a speech from commenting on rate policy.

In his first public appearance of the year, Powell said at a forum sponsored by the Swedish central bank that the Fed’s independence is essential for it to battle inflation.

Recent comments by other Fed officials have supported the view that the central bank needs to remain aggressive in raising interest rates to control inflation. Fed Governor Michelle Bowman said on Tuesday the bank will have to raise interest rates further to combat high inflation.

“Everybody hangs on every word from the Fed,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. Powell “didn’t really say anything” about policy, he added.

Investors anxiously awaited the US consumer prices index report Thursday, which is expected to show some moderation in year-on-year prices in December.

Traders are betting on a 25-basis point rate hike at the Fed’s upcoming policy meeting in February.

“There are some indications that inflation is slowing significantly. What investors are really looking for is a gap down in major inflation data that could probably get the Fed’s attention,” Ghriskey said.

Amazon.com Inc. shares rose 2.9% and gave the Nasdaq and S&P 500 their biggest boosts.

The Dow Jones Industrial Average rose 186.45 points, or 0.56%, to 33,704.1; the S&P 500 gained 27.16 points, or 0.70%, at 3,919.25; and the Nasdaq Composite added 106.98 points, or 1.01%, at 10,742.63.

Shares of Microsoft Corp rose 0.8%, a day after Semafor, citing people familiar with the matter, reported that the tech company was in talks to invest $10 billion in ChatGPT-owner OpenAI.

Communications services was the day’s best-performing sector, while energy rose along with oil prices.

This week marks the start of the fourth-quarter earnings season for S&P 500 companies, with results from several of Wall Street’s biggest banks due later this week.

Shares of investment bank Jefferies Financial Group rose 3.8% on Tuesday, a day after it posted its second-best year for investment banking revenue. It also reported a 52.5% slump in fourth-quarter profit.

Analysts expect overall S&P 500 earnings to have declined 2.2% in the fourth quarter from a year ago, according to IBES data from Refinitiv, as worries about rising rates and the economy mounted.

Some investors are hoping for signs that the Fed may soon take a break after raising the federal funds rate seven times in 2022.

The World Bank on Tuesday slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies.

Volume on US exchanges was 10.02 billion shares, compared with the 10.91 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.

The S&P 500 posted four new 52-week highs and no new lows; the Nasdaq Composite recorded 71 new highs and 30 new lows. — Reuters