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.

US stocks have ended lower as investors shifted gears after considering the possibility that the US Federal Reserve may take longer to start cutting interest rates.

Traders are keeping a close eye on speeches by Fed officials this week, including Chair Jerome Powell on Tuesday, for any change in the central bank’s rhetoric after data last week showed services activity was strong in January as well as strong job growth.

“We got that blowout jobs report, and people have had to reassess what the outlook for the Fed and the economy is. Tomorrow it will be interesting to see if Powell continues his transformation from hawk to dove,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

US Treasury Secretary Janet Yellen said on Monday the United States may avoid a recession as inflation is coming down while the labour market remains strong.

After taking a hit in 2022, US equities have recovered strongly in 2023, led by megacap growth stocks amid short-lived hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.

Money market participants now see the benchmark rate peaking at 5.1 per cent by July, in line with what most policymakers have backed repeatedly.

Yield on the 10-year US Treasury note extended gains to a four-week high.

On the corporate side, analysts expect quarterly earnings of S&P 500 firms to decline 2.8 per cent in the fourth quarter, according to Refinitiv.

The Dow Jones Industrial Average ended down 35.85 points, or 0.11 per cent, at 33,890.16, the S&P 500 lost 25.44 points, or 0.62 per cent, to 4,111.04 and the Nasdaq Composite dropped 119.51 points, or 1 per cent, to 11,887.45.

Volume on US exchanges was 11.17 billion shares, compared with the 11.858 billion average for the full session over the last 20 trading days.

Tyson Foods Inc fell 4.6 per cent after missing analysts’ estimates for quarterly revenue and profit.

Miner Newmont Corp slid 4.5 per cent on its $US16.9 billion ($A24.6 billion) offer for Australian peer Newcrest Mining Ltd to build a global gold behemoth.

Contrary to the overall trend, Tesla Inc rose 2.5 per cent after a US jury on Friday found Chief Executive Elon Musk and his company were not liable for misleading investors when Musk tweeted in 2018 that he had “funding secured” to take the electric-vehicle maker private.

Meme stocks, such as AMC Entertainment and Gamestop , also gained steam late in the session, ending 11.8 per cent and 7.2 per cent higher, respectively.

US-listed Chinese stocks such as Pinduoduo Inc fell 1.9 per cent on geopolitical concerns after a US military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.

Most of the 11 major S&P 500 sector indexes were in the red, except for utilities and consumer staples.

Declining issues outnumbered advancing ones on the NYSE by a 3.37-to-1 ratio; on Nasdaq, a 1.98-to-1 ratio favoured decliners.

The S&P 500 posted 5 new 52-week highs and 1 new low; the Nasdaq Composite recorded 79 new highs and 19 new lows.

(Reuters) – Major U.S. stock indexes ended lower on Friday after surprisingly strong jobs data sparked concerns about aggressive Federal Reserve action, while investors digested a mixed bag of megacap company earnings reports.

The S&P 500 still posted a gain for the week, which included a string of major market events, and stood not far from five-month highs. The Nasdaq tallied its fifth straight weekly rise, its longest such streak since late 2021.

U.S. job growth accelerated sharply in January, with nonfarm payrolls surging by 517,000 jobs, well above an estimate of 185,000. The unemployment rate hit a more than 53-1/2-year low of 3.4%.

In another sign of economic strength, U.S. services industry activity rebounded strongly in January.

Investors have been balancing hopeful signs that the economy could avoid a feared recession against concerns about how long the Fed will keep interest rates high to rein in inflation. The S&P 500 gained earlier this week after comments that were more dovish than expected from Fed Chair Jerome Powell, who acknowledged progress in the fight against inflation.

The jobs report “was an incredible surprise and it raises a lot of questions about what the Fed is going to do next,” said Kristina Hooper, chief global market strategist at Invesco. “What I think is causing some of the volatility is markets trying to make sense of how the Fed will perceive this.”

The Dow Jones Industrial Average fell 127.93 points, or 0.38%, to 33,926.01, the S&P 500 lost 43.28 points, or 1.04%, to 4,136.48 and the Nasdaq Composite dropped 193.86 points, or 1.59%, to 12,006.96.

For the week, the S&P 500 rose 1.6%, the Dow slipped 0.15%, and the Nasdaq gained 3.3%.

Wall Street’s main indexes have had a solid start to the year as tech and other stocks that struggled in 2022 have rebounded, fueled by hopes that the Fed’s rate hikes would soon end and the economy might be able to navigate a soft landing.

“So many things were trading at bargain-basement prices three, four months ago,” said Eric Kuby, chief investment officer at North Star Investment Management Corp. “That has gone away… I think we are in a fair game now.”

On Friday, investors were also digesting another heavy batch of corporate results.

Shares of Apple, the largest U.S. company by market value, rose 2.4%. The company forecast that revenue would fall for a second quarter in a row but that iPhone sales were likely to improve as production had returned to normal in China.

Shares of Amazon slumped 8.4% as the company said operating profit could fall to zero in the current quarter as savings from layoffs do not make up for the financial impact of consumers and cloud customers clamping down on spending.

Alphabet shares dropped 2.7% after the Google parent posted fourth-quarter profit and sales short of Wall Street expectations.

In other corporate news, Ford Motor shares slid 7.6% after the automaker predicted a difficult year ahead.

Declining issues outnumbered advancing ones on the NYSE by a 2.82-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 16 new 52-week highs and one new low; the Nasdaq Composite recorded 127 new highs and 16 new lows.

About 12.8 billion shares changed hands in U.S. exchanges, compared with the 11.9 billion daily average over the last 20 sessions.

(Reporting by Lewis Krauskopf in New York, Shreyashi Sanyal and Johann M Cherian; Additional reporting by Shubham Batra; Editing by Sriraj Kalluvila, Maju Samuel and Cynthia Osterman)

NEW YORK: The Nasdaq and S&P 500 ended higher on Thursday and touched roughly five-month highs as a more dovish-than-expected message from Federal Reserve chair Jerome Powell boosted equities and Meta Platforms shares soared on rigorous cost controls.

The Dow slipped, dragged down by declines in some big healthcare stocks.

Investors were still digesting the Fed’s policy decision on Wednesday and comments from Powell, who acknowledged progress in the fight against inflation and appeared reluctant to push back against the rally in stocks and bonds.

“I think the reaction to yesterday’s Fed comments really encouraged investors to go risk on,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “The bottom line for investors I think is that the Fed’s comments were unexpected.”

The Dow Jones Industrial Average fell 39.02 points, or 0.11%, to 34,053.94, the S&P 500 gained 60.55 points, or 1.47%, to 4,179.76 and the Nasdaq Composite added 384.50 points, or 3.25%, to 12,200.82.

Shares of megacap stocks Apple, Amazon and Google parent Alphabet also gained strongly ahead of results due after market close on Thursday, with Apple rising 3.7%, and Amazon and Alphabet both up over 7%.

In initial after-hours trading, however, shares of all three companies fell after their respective results.

After a bruising 2022, US stock markets have made a strong start to the year, with tech and other stocks that lagged last year leading the rebound amid hopes that the Fed will temper its aggressive rate hikes, which in turn could alleviate some pressure on equity valuations.

Those trends continued on Thursday. The communications services sector jumped 6.7%, its biggest daily gain in almost three years, led by a 23.3% surge for Facebook parent Meta. The company revealed stricter cost controls this year and a $40 billion share buyback, as CEO Mark Zuckerberg called 2023 the “year of efficiency.”

The S&P 500’s 50-day moving average moved above the 200-day moving average, a pattern known as a “golden cross” that is perceived by many as a bullish technical signal for near-term momentum.

The energy sector, one of last year’s standout performers, fell 2.5%, while healthcare dropped 0.7%.

UnitedHealth Group shares fell 5.3% after the U.S. government proposed Medicare Advantage reimbursement rates below analyst estimates, and the stock weighed down the Dow. A 3.3% decline in Merck shares, after the drugmaker forecast 2023 earnings below Wall Street estimates, also dragged on the blue chip index.

Shares of drugmaker Eli Lilly dropped 3.5% after sales of its closely watched diabetes drug missed estimates.

Data showed jobless claims fell last week to a nine-month low, highlighting the labor market’s resilience, ahead of monthly U.S. employment numbers on Friday.

Advancing issues outnumbered declining ones on the NYSE by a 2.29-to-1 ratio; on Nasdaq, a 2.55-to-1 ratio favored advancers.

The S&P 500 posted 36 new 52-week highs and one new low; the Nasdaq Composite recorded 162 new highs and 16 new lows.

About 15 billion shares changed hands in U.S. exchanges, compared with the 11.7 billion daily average over the last 20 sessions.— Reuter

U.S. stocks and bonds rallied on Wednesday, much to the chagrin of traders who had ramped up bearish bets on the expectation that Federal Reserve Chairman Jerome Powell would push back against the market’s latest advance.

Now, the question on most traders’ minds is: With Powell out of the way, do markets have the all-clear to keep on chugging?

It’s very possible, market strategists said, citing Powell’s remarks about financial conditions during Wednesday’s press conference, which followed the Fed’s decision to hike interest rates by another 25 basis points.

According to market strategists, the upshot is that instead of trying to corral or push back against markets, Powell has decided to disregard their latest moves, treating them as insignificant, or as further evidence that the Fed’s tactics to curb inflation are working without much blowback to the real economy or labor market.

During the opening minutes of the question-and-answer session segment of Wednesday’s press conference, Powell said financial conditions had tightened substantially and that the Fed was no longer concerned with short-term fluctuations.

U.S. stocks seemed to jerk higher in response, as market strategists said Powell seemed to be signaling that higher equity prices and lower bond yields are no longer a threat to the Fed’s inflation-fighting mission.Some even took issue with Powell’s underlying claim, arguing that according to at least one popular measure, financial conditions are little-changed from a year ago. Among them was Allianz’s Mohamed El-Erian, who sounded off in a tweet, saying “Not sure which index he is using. The most widely cited ones show overall financial conditions as loose as they were a year ago.”

Financial-conditions indexes are supposed to reflect the impact that fluctuations in markets and exchange rates are having on the real economy, according to Guy LeBas, chief fixed-income strategist at Janney, in a phone interview.

By not pushing back when asked, Powell has given equity and bond markets “tacit approval” to keep on rallying, LeBas said.

Others took a similar view.

“The fact that Powell thinks that financial conditions have tightened, when they have eased across a range of metrics in recent months, is dovish,” said Neil Dutta,  head of economics at Renaissance Macro Research, in a tweet.

Market participants had seemingly become “obsessed” with the notion that Powell and the rest of the FOMC would push back against looser financial conditions during the run-up to Wednesday’s meeting, LeBas said. This belief even helped rattle U.S. stocks in the days ahead of the Fed meeting, market strategists said.

Instead, Powell repudiated this notion, and rightfully so, according to LeBas, since the impact that market swings have on inflation is rarely so direct.

“Stable FCIs at a relatively high level…will also work to constrain activity. In that respect, we don’t believe Fed policymakers spend as much time today obsessing over FCIs as market participants seem to think,” LeBas said in a note to clients. That view turned out to be vindicated.

The Chicago Fed’s National Financial Conditions Index shows substantial easing since October. It currently stands at -0.35, compared with roughly -0.11 in mid-October. Higher equity prices and lower bond yields correspond with a lower number on the index. Bond yields move inversely to bond prices.

By comparison, the index was much lower before the Federal Reserve started hiking interest rates in March 2022. It stood at -0.60 on Dec. 31, 2021.

The S&P 500 SPX, +1.05% gained 42.61 points, or 1.1%, on Wednesday to finish at 4,119.21, its highest level since August. For the Nasdaq Composite COMP, +2.00%, it was the highest close since September. The yield on the 2-year Treasury note TMUBMUSD02Y, 4.104% fell by roughly 8 basis pints to 4.125%, while the yield on the 10-year note TMUBMUSD10Y, 3.412% fell by 10.4 basis points to 3.442%. U.S. stocks saw substantial gains in January, with the S&P 500 rising more than 6%, while some of the most speculative stocks saw even larger gains. The S&P 500 fell by 19.4% in 2022.

The U.S. Dollar Index DXY, -0.25%, a gauge of the buck’s strength vs. a basket of its main rivals, fell by 0.9% to 101.14.

Of course, this wasn’t always the case. For a while last year, it seemed that the Fed viewed rallies in markets as a direct affront. Wednesday’s reaction is a far cry from how markets responded to Powell’s fire-and-brimstone speech at Jackson Hole in August. Back then, Powell delivered a terse statement where he said the Fed would continue with its rate hikes despite the likelihood that U.S. businesses and households would suffer.

Many market commentators said his August remarks appeared calibrated to push back on a rally in stocks and bonds driven by premature hopes for a Fed pivot. If this was the case, then they had their desired effect: The S&P 500 fell to fresh lows a few weeks later.

Powell has a good reason for abandoning this strategy, according to LeBas.

“The impulse from financial conditions has already done its job,” he said.

With Powell out of the way, will stocks drift higher from here? It’s possible, market strategists said. But there are other factors that could trip them up.

Corporate earnings are one possible candidate. Profits are on track to fall by 2.4% in the fourth quarter compared with 2021, according to Refinitiv data.

However, S&P 500 stocks are still on track to outperform Wall Street’s relatively low expectations, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

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)