By Wayne Cole

SYDNEY (Reuters) – Asian shares slipped on Monday as markets were forced to price in ever-loftier peaks for U.S. and European interest rates, slugging bonds globally and pushing the dollar to multi-week highs.

Investors are braced for more challenging U.S. data including the closely-watched ISM measures of manufacturing and services, the latter being especially important following January’s unexpected spike in activity.

There are also at least six Federal Reserve policy makers on the speaking diary this week to offer a running commentary on the likelihood of further rate hikes.

China has manufacturing surveys and the National People’s Congress kicks off at the weekend and will see new economic policy targets and policies, as well as a reshuffling of government officials.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, having shed 2.6% last week. Japan’s Nikkei eased 0.4% and South Korea 0.9%.

S&P 500 futures were flat, while Nasdaq futures edged up 0.1%. Strong data on spending and core prices saw the S&P 500 crack support at 4,000 on Friday and retrace 61.2% of this year’s rally.

Fed futures now have rates peaking around 5.42%, implying at least three more hikes from the current 4.50% to 4.75% band. Markets have also nudged up the likely rate tops for the European Central Bank and the Bank of England.

Bruce Kasman, head of economic research at JPMorgan, has added another quarter-point hike to the ECB outlook, taking it to 100 basis points. Germany’s 2-year bond yield broke above 3.0% on Friday for the first time since 2008.

“The risk is clearly skewed toward greater action from the Fed,” says Kasman.

“Demand is proving resilient in the face of tightening and lingering damage to supply from the pandemic is limiting the moderation in inflation,” he added. “The transmission of the rapid shift in policy still underway also raises the risk of a recession not intended by central banks.”

The Atlanta Fed’s influential GDP Now tracker has the U.S economy growing an annualised 2.7% in the first quarter, showing no slowdown from the December quarter.

Higher rates and yields stretch valuations for equities, especially those with high PE ratios and low dividend payouts, which includes much of the tech sector.

Shares in the United States trade at a price to earnings multiples of around 17.5 times forward earnings, compared to 12 times for non-U.S. shares.

Ten-year Treasury bonds also yield more than twice the estimated dividend yield of the S&P 500 Index, and with much less risk.

With the earnings season almost over, around 69% of earnings have surprised on the upside, compared to a historical average of 76%, and annual earnings growth is running around -2%.

The upward shift in Fed expectations has been a boon for the U.S. dollar, which climbed 1.3% on a basket of currencies last week to last stand at 105.220.

The euro was pinned at $1.0548, after touching a seven-week low of $1.0536 on Friday.

The dollar scaled a nine-week top on the yen to stand at 136.40, aided in part by dovish comments from top policy makers at the Bank of Japan.

The rise in the dollar and yields has been a burden for gold, which shed 1.7% last week and was last lying at $1,812 an ounce. [GOL/]

Oil prices edged higher as the prospect of lower Russian exports was balanced by rising inventories in the United States and concerns over global economic activity. [O/R]

Brent gained 35 cents to $83.51 a barrel, while U.S. crude rose 34 cents to $76.66 per barrel.

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

By Rae Wee

SINGAPORE (Reuters) – The dollar and sterling were buoyant on Wednesday, after a surprise rebound in business activity in the United States and the UK raised the likelihood that their respective central banks would have further to go in raising interest rates.

Elsewhere, the kiwi surged after the Reserve Bank of New Zealand (RBNZ) on Wednesday raised rates by an expected 50 basis points, but reiterated that inflation remains too high and employment is beyond its maximum sustainable level.

Data released on Tuesday showed that U.S. business activity unexpectedly rebounded in February to reach its highest level in eight months, while the UK flash composite Purchasing Managers’ Index (PMI) similarly surged to 53.0 this month, above the 50 threshold for growth for the first time since July.

The dollar rose against most major currencies after the upbeat data save for sterling, which jumped 0.6% on Tuesday. It was last 0.05% lower at $1.2107.

In the euro zone, its flash composite PMI likewise climbed to a nine-month high of 52.3 in February, supported by surprisingly strong services growth.

The euro, however, failed to benefit from the data as it slid 0.36% in the previous session. It was last 0.04% higher at $1.0652.

“It was kind of an issue of relativities in a sense, that while the services sectors performed better across the board, that extra lift that sterling got, was because of that very, very strong performance,” said Rodrigo Catril, senior currency strategist at National Australia Bank.

“I think the euro is still in a sort of more difficult situation, given that there’s a general sense that the ECB still has more work to do, and that puts a little bit of strain in terms of their growth outlook.”

Against the Japanese yen, the dollar rose to a two-month high of 135.23 in the previous session, and slipped marginally to 134.91 in early Asia trade on Wednesday.

The U.S. dollar index stood at 104.13, having gained 0.3% on Tuesday.

The rebound in U.S. business activity comes on the back of a recent slew of resilient economic data pointing to a still-tight labour market, sticky inflation and robust retail sales in the world’s largest economy.

Markets have since raised their expectations of how high the Federal Reserve would need to lift rates to tame inflation, sending U.S. Treasury yields surging.

The two-year yields jumped to an over three-month high of 4.738% in the previous session, and last stood at 4.6933%.

The benchmark 10-year note yields peaked at 3.9660% in early Asia trade on Wednesday, its highest since last November.

In other currencies, the Aussie slid after data showed that Australian wages grew at the fastest annual pace in a decade last quarter, but was still short of market forecasts.

The Australian dollar fell about 0.3% after the data, and was last 0.1% lower at $0.6849.

The kiwi rose 0.39% to $0.6238, after earlier jumping roughly 0.5% to an intra-day high of $0.6248 immediately after the RBNZ’s cash rate decision.

(Reporting by Rae Wee; Editing by Shri Navaratnam)

February 22 (Reuters) – A look at the day ahead in Asian markets by Jamie McGeever.

US economic indicators on Tuesday accelerated the unrelenting rise in US interest rate expectations, confirming that good news is definitely bad news, at least for financial markets.

Wall Street and global stocks had their worst day of the year after data from the Purchasing Managers’ Index showed the US services sector is coming back to life. Asian markets are likely to follow when they open on Wednesday.

None of the 18 economists polled by Reuters expected the services PMI to bounce back above the 50.0 line between contraction and expansion, and the shockwaves were felt across asset classes.

Stocks plummeted, volatility and the dollar soared, the two-year Treasury yield neared the November post-2007 peak, the US final implied interest rate rose to a new high of 5.36%, and a potential 50 basis point rate hike in the next month is ahead of dealers’ radar.

By Oliver Gray 

Investing.com – U.S. stock futures were trading lower during Monday’s evening deals, with major benchmark averages remaining closed during the regular session for a public holiday.

By 6:30pm ET (11:30pm GMT) Dow Jones Futures and S&P 500 Futures fell 0.3% each, while Nasdaq 100 Futures slipped 0.1%.

In extended deals, Nordson Corp (NASDAQ:NDSN) added 1.1% after the company reported Q1 EPS of $1.95 versus $1.98 expected on revenues of $610.48 million versus $622.98 million expected.

Williams Companies Inc (NYSE:WMB) added 1.4% after reporting Q4 EPS of $1.82, beating expectations of $0.50, while revenue came in at $10.97 billion versus $2.89 billion expected.

HealthStream (NASDAQ:HSTM) reported Q4 EPS of $0.08 versus $0.05 expected on revenue of $68.54 million versus $68.02 million expected.

Ahead in the week, investors will be focused on the release of the FOMC’s latest meeting minutes where policymakers raised rates by 25 basis points.

On the earnings front, major retail companies including Walmart Inc (NYSE:WMT) and Home Depot Inc (NYSE:HD) are set to release results later on Tuesday.

On the bond markets, United States 10-Year rates were at 3.842%.

By Ambar Warrick

Investing.com–Oil prices fell slightly on Friday and were set to close the week lower as concerns over rising U.S. interest rates and a strong dollar largely offset optimism over a potential recovery in Chinese demand. 

U.S. producer price index inflation read higher than expected for January, coming on the heels of a red-hot consumer price index report that indicated that inflation will likely remain stubborn in the world’s largest economy.

The readings, coupled with hawkish overnight comments from Federal Reserve officials, pointed to more interest rate hikes in the coming months- which markets fear could stymie economic growth this year and weigh on crude demand.

Brent oil futures fell 0.1% to $84.55 a barrel, while West Texas Intermediate crude futures fell 0.7% to $77.97 a barrel by 21:13 ET (02:13 GMT). Both contracts were set to lose between 1.5% and 2% this week.

The dollar surged overnight as Fed officials James Bullard and Loretta Mester both talked up more interest rate hikes by the central bank, which in turn weighed on crude prices. Strength in the dollar makes crude more expensive for international buyers, denting global oil demand. 

Oil prices were also dented earlier this week by the Biden Administration’s planned sale of 26 million barrels of crude from the Strategic Petroleum Reserve. This, coupled with data showing a substantially bigger-than-expected build in U.S. crude inventories, pointed to a potential U.S. supply glut in the near-term.

The negative supply and monetary policy cues largely offset optimism over a recovery in Chinese demand, which had offered crude prices some respite this week. Oil markets saw volatile swings in recent sessions as markets weighed a more positive demand outlook against signs of near-term strife.

Both the Organization of Petroleum Exporting Countries and the International Energy Agency hiked their demand forecasts for the year, with a recovery in China set to drive over 50% of oil demand this year.

China also outlined additional spending measures this week, as it moves to shore up economic growth after three years of COVID lockdowns. 

But economic data from China has been somewhat middling, even after the country relaxed most anti-COVID measures earlier this year. Oil bulls are now holding out for more consistent signs of an economic recovery in the world’s largest oil importer. 

BENGALURU: The S&P 500 ended higher on Wednesday after stronger-than-expected retail sales data offered evidence of resilience in the US economy, but gains were capped as investors worried about more interest rate hikes by Federal Reserve in the months ahead.

A Commerce Department report showed retail sales surged 3% in January as purchases of motor vehicles and other goods pushed the number well past the 1.8% estimate from economists polled by Reuters.

On Tuesday, data showed US consumer prices accelerated in January, boosting expectations that the Fed will raise the policy rate at least twice more this year to the 5-5.25% range.

“The good news from retail, and broadly from the stronger economy, has been mostly priced in,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky. “At the same time, that strength has taken market expectations of rate cuts off the table and moved the terminal Fed funds rate a little bit higher.”

Fuelled by a rebound in growth stocks that were hammered in last year’s stock market downturn, the S&P 500 has climbed 8% so far in 2023, while the Nasdaq has recovered 15%. A better-than-expected quarterly earnings season has provided cautious optimism.

More than half of all S&P 500 companies have reported quarterly earnings, and nearly 70% of those have topped profit expectations, according to I/B/E/S data from Refinitiv. That compares to a long-term average of 66%.

Apple, Alphabet, Amazon and Tesla rose between 1.4% and 2.4%, driving gains in the S&P 500 and Nasdaq.

The S&P 500 climbed 0.28% to end the session at 4,147.61 points.

The Nasdaq gained 0.92% to 12,070.59 points, while Dow Jones Industrial Average rose 0.11% to 34,128.05 points.

Nine of the 11 S&P 500 sector indexes rose, led by a 1.2% gain in consumer discretionary.

Roblox soared 26% after the gaming platform popular with kids topped quarterly bookings estimates.

US-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) fell 5.3% after Warren Buffett’s Berkshire Hathaway Inc slashed its stake in the chipmaker.

Shares of Airbnb Inc rose over 13% after the company posted forecast-beating results due to strong travel demand.

Devon Energy slumped about 10% after the shale oil producer missed expectations for quarterly profit due to a hit to production from severe cold weather in the United States and higher expenses.

After the bell, Roku surged 14% following a revenue forecast that beat analysts’ expectations.

Across the US stock market, advancing stocks outnumbered falling ones by a 1.4-to-one ratio.

The S&P 500 posted 19 new highs and no new lows; the Nasdaq recorded 84 new highs and 55 new lows.

Volume on US exchanges was relatively light, with 10.5 billion shares traded, compared to an average of 11.8 billion shares over the previous 20 sessions. — Reuters

By Yasin Ebrahim

Investing.com — The Dow closed lower Tuesday, as investors digested the latest data showing signs of cooling, but stickier inflation that triggered a jump in Treasury yields on bets for a more aggressive Federal Reserve.

The Dow Jones Industrial Average fell 0.46%, or 156 points, the Nasdaq was up 0.57%, and the S&P 500 was flat.

The consumer price index rose 0.5% last month, in line with expectations, but for the 12 months through January was 6.4%, above expectations of 6.2%. Core inflation, which strips out energy and food prices, slowed to an annualized pace of 5.6% in January, though that was smaller than the expected decrease of 5.5%.

“Inflation has peaked but isn’t declining as quickly as the Fed would have liked,” Jefferies said in a note.

The 2-year Treasury yield, which is sensitive to rate hikes, jumped to a more than 3-month high, topping 4.6% as investors continue to price further Fed rate hikes.

Markets are now expecting that “the FOMC will raise its terminal rate from 5.25% in December to 5.5% in March when the dots get updated, and possibly higher,” Scotiabank Economics said in a note.

The move higher in rates pegged back growth sectors of the market including big tech, but that was more than offset by strength in semiconductors, led by Nvidia.

NVIDIA (NASDAQ:NVDA) closed more than 5% higher after Bank of America waxed lyrical about the chipmaker’s potential boost from a surge in demand for artificial intelligence programs.

Nvidia is in pole position to lead the “AI arms race,” Bank of America said and raised its price target on the chipmaker to $255 from $215 a share.

Palantir Technologies (NYSE:PLTR), meanwhile, was also a source of optimism for tech as the data analytics company’s stock price soared 21% after reporting its maiden quarterly profit.

The company said it expected to remain in profit for 2023, confounding Wall Street expectations for a full year loss of 11 cents a share. But some remain cautious on the stock, citing “ambitious” guidance.

“Palantir established another seemingly overly ambitious target of 40% US Commercial growth in CY23. All in all, we walked away from the print incrementally cautious, and we’re sticking with our underperform rating,” Deutsche Bank said in a note.

Elsewhere on the earnings front, Avis (NASDAQ:CAR) delivered quarterly earnings of $10.46 a share, markedly better than forecasts of $6.81 a share, sending its stock up 10%.

Consumer staples were one of the biggest drags on the market, weighed down by a more than 1% fall in Coca-Cola (NYSE:KO) after the beverage giant reported in-line earnings, but revenue that topped estimates.

Coca-Cola’s bottom line was kept in check by “headwinds from the BODYARMOR acquisition and higher operating costs,” Goldman Sachs said, though pointed to “strong” guidance as a reason for optimism.

“Overall we think KO’s guidance is reflective of better than feared consumer elasticities despite the recent and significant price increases the industry has implemented,” it added.

SYDNEY : Asian shares slid and the dollar rose on Monday as investors hunkered down for U.S. inflation data that could jolt the outlook for interest rates globally, while accelerating or reversing the recent spike in bond yields.

An air of geopolitical mystery was added by news the U.S air force had shot down a flying object near the Canadian border, the fourth object downed this month.

Officials declined to say whether it resembled the large white Chinese balloon that was shot down earlier this month.

In any case, it provided an extra excuse for caution and MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.7 per cent, after losing 2.2 per cent last week.

Japan’s Nikkei fell 1.2 per cent, and South Korea 1.0 per cent. Chinese blue chips nudged up 0.1 per cent aided by strong data on bank lending.

EUROSTOXX 50 futures fell 0.1 per cent, as did FTSE futures. S&P 500 futures were off 0.4 per cent, while Nasdaq futures eased 0.5 per cent.

The near-term direction for assets could well be determined by U.S. data on consumer prices and retail sales this week, with much resting on whether inflation continued to slow in January.

Median forecasts are for headline and core consumer prices to rise 0.4 per cent for the month, with sales rebounding by 1.6 per cent.

Risks could be to the upside given a re-analysis of seasonal factors released last week saw upward revisions to CPI in December and November. That lifted core inflation on a three-month annualised basis to 4.3 per cent, from 3.1 per cent.

There were also changes to the weightings for shelter costs and used car prices which might bias the CPI higher.

Bruce Kasman, head of economic analysis at JPMorgan, expects core CPI to rise 0.5 per cent and sales to jump 2.2 per cent, underlining the message of resilience from the bumper January payrolls report.

“Developed market labor markets have tightened in recent months against our expectations of easing,” says Kasman.

“The latest news reinforces conviction that we are not on a soft-landing path and that a recession will eventually be necessary to bring inflation back to central bank comfort zones.”

Markets have already sharply raised the profile for future tightening by the Federal Reserve, with rates now seen peaking up around 5.15 per cent and cuts coming later and slower.

There is also a full slate of Fed officials speaking this week to provide a timely reaction to the data.

Yields on 10-year Treasuries are at five-week highs of 3.75 per cent, having jumped 21 basis points last week, while two-year yields hit 4.51 per cent.

That shift helped stabilise the dollar, especially against the euro which slipped 1.1 per cent last week and extended the retreat on Monday to a five-week low of $1.0656. That was well away from its early February high of $1.0987.

The dollar also got a leg up on the yen on Friday when reports emerged Japan’s government was likely to appoint academic Kazuo Ueda as the next Bank of Japan governor.

The surprise news sparked speculation about an early end to the BOJ’s super-easy policies, though Ueda himself later said it was appropriate to the current stance.

The dollar was last up 0.3 per cent at 131.76 yen, after bouncing from a trough of 129.80 on Friday.

The rise in yields and the dollar has been a burden for gold prices, which was stuck at $1,860 an ounce compared to an early February peak of $1,959.

Oil prices ran into fresh selling, having jumped on Friday when Russia said it planned to cut its daily output by 5 per cent in March after the West imposed price caps on Russian oil and oil products.

Brent slipped 47 cents $85.92 a barrel, while U.S. crude fell 52 cents to $79.20.

Investing.com — The Dow closed lower Wednesday, as a slump in Google (NASDAQ:GOOGL) wounded tech just as sentiment on stocks was soured by a slew of hawkish remarks from Federal Reserve officials.

The Dow Jones Industrial Average fell 0.61%, or 207 points, the Nasdaq was down 1.7%, and the S&P 500 fell 1.1%

Google held an event to promote the launch of its new artificial intelligence chatbot ‘Bard,’ but the AI chatbot reportedly delivered inaccurate answers in an online advertisement just ahead of the event.

In response to the glitch, Google said it will use external feedback and its own testing to ensure Bard’s responses “meet a high bar for quality, safety and groundedness in real-world information.” 

Sentiment on big tech was soured further by ongoing remarks from Fed members who continue to talk up the long road ahead to stable inflation that will likely require further rate hikes.

Federal Reserve Governor Christopher Waller warned of a “long fight” to curb inflation that could require “interest rates higher for longer than some are currently expecting.”

The remarks echoed those of New York Fed President John Williams who said the Fed “needs to do more” to cool inflation, though added that the recent shift in market bets for two further rate hikes was “still a reasonable view.”

Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Meta Platforms Inc (NASDAQ:META) were in the red, but Microsoft (NASDAQ:MSFT) – still riding high on optimism about its plans to integrate ChatGPT into its search engine, Bing, as well other products – was the relative outperformer, closing just below the flatline.

On the earnings front, meanwhile, Uber Technologies Inc (NYSE:UBER) was the standout performer, closing up more than 5% after the ride-hailing company reported a surprise fourth-quarter profit and upbeat guidance.

“This was a major step in the right direction for Uber with a profitable growth story into 2023 and beyond,” Wedbush said as it lifted its price target on the stock to $40 from $38 a share.

Chipotle Mexican Grill (NYSE:CMG), meanwhile, fell 5% after reporting weaker-than-expected quarterly results, weighed down by softer demand during the holiday quarter.

Under Armour (NYSE:UAA) reported quarterly results that beat on both the top and bottom lines, but its shares fell 8% as promotional activity is expected to continue to weigh on gross margins just as inventories continue to grow.

Energy, meanwhile, was pressured by a slide in APA Corporation (NASDAQ:APA), EQT Corporation (NYSE:EQT), and Chevron Corp (NYSE:CVX), though higher oil prices, underpinned by a stronger dollar, helped keep losses in check.

Investing.com –The S&P 500 jumped in wild trading after Federal Reserve chairman Jerome Powell offered little new clues on policy in a speech Tuesday, reiterating the need for more rate hikes in what will likely be a long-drawn-out battle against inflation. 

The Dow Jones Industrial Average gained 0.78% or 265 points, the S&P 500 rose 1.3%, and the Nasdaq jumped 1.9%

“The bears have been squeezed all year in 2023, they are in a very precarious position,” Zhiwei Ren, Managing Director and Portfolio Manager at Penn Mutual Asset Management told Investing.com’s Yasin Ebrahim on Tuesday. “They hoped the Fed would send a strong hawkish signal today, after the strong job data last week. But we didn’t get that, Powell didn’t say anything new today,” Ren added.

Powell’s remarks were largely a repeat of his prior remarks, but many were eager to see if the recent January jobs report would force him to tilt more hawkish. Powell admitted that last week’s jobs report was stronger than anyone had expected, and was further evidence that inflation will take a long time to ease to the Fed’s 2% target.    

Bringing down inflation will take a “significant period of time,” Powell said Tuesday to the Economic Club of Washington, reiterating the need for ongoing rate hikes.

“[W]e think that we’re going to need to do further rate increases, as we said [at the February meeting], and we think that we’ll need to hold policy and restrictive level for a period of time,” he added.

After choppy trading, bullish bets on stocks prevailed, driven by a surge in big tech.

Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOGL) led to the upside just as the AI arms race between the two tech heavyweights and others in big tech gets underway.

A day after Google released its AI-powered chatbot Bard, Microsoft held an event detailing plans to integrate ChatGPT into its search engine Bing as well as other products.

“With new and attractive features for its users on the Bing search engine, MSFT’s AI-driven strategy is set to challenge the web search market by grabbing market share as users see increased benefits and a new user experience,” Wedbush said in a note.

Energy was also among the leading sectors on the day as oil prices were supported by a weaker dollar and ongoing China-led demand optimism.

Valero Energy Corporation (NYSE:VLO), Marathon Petroleum (NYSE:MPC), and Occidental Petroleum Corporation (NYSE:OXY) were the biggest gainers. 

On the earnings front, Chegg Inc (NYSE:CHGG) fell 17% after reporting guidance that missed Wall Street expectations amid a softer backdrop for subscriber growth. Pinterest Inc ‘s  (NYSE:PINS) mixed quarterly results that missed on the top line sent its shares down 5%.

In deal news, CVS Health (NYSE:CVS) is reportedly closing in on a deal to buy the primary-care provider Oak Street Health (NYSE:OSH) for $10.5 billion.