Asian shares slip, and oil holds gains ahead of the US inflation test. Asian stocks slumped as Wall Street wobbled overnight, preparing for critical U.S. inflation data on Wednesday. An oil price surge raised concerns about continuing price pressures, confounding the interest rate picture.
After Reuters reported that the European Central Bank anticipates inflation to continue at over 3% next year, chances of a rise rose, supporting the euro.
Europe opens lower, with EURO STOXX 50 futures down 0.5%. S&P 500 and Nasdaq futures remained essentially unchanged.
MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 0.3%, while Tokyo’s Nikkei (.N225) fell 0.1%.
Chinese blue chips (.CSI300) fell 0.7% on uncertain economic prospects for the world’s second-biggest economy. The Hang Seng index (.HSI) ended flat after early rises.
The important U.S. Consumer Price Index (CPI) data on Wednesday could give insight into inflation and whether the Federal Reserve is done tightening.
While core CPI is expected to fall to 4.3% from 4.7% in August, increased energy prices will maintain headline inflation at 3.6%. The Fed will undoubtedly notice the current oil price rise to ten-month highs.
National Australia Bank currency analyst Ray Attrill stated, “What’s happening with oil and headline inflation is still too soon for the Fed to sign the all clear as far as the risks of some incremental tightening before they’re done.”
“If food and energy volatility persists, it tends to bleed into core inflation measures.”
Wednesday’s oil increases continued. Brent futures rose 0.3 to $92.31, reaching a ten-month high achieved a session earlier, while U.S. West Texas Intermediate futures rose 0.3% to $89.13.
On Wall Street, the S&P 500 lost 0.6%, Nasdaq 1%, and Dow Jones largely flat overnight.
Apple (AAPL.O) fell 1.8% after announcing new iPhones without raising pricing amid a worldwide smartphone oversupply. In comparison, Oracle shares (ORCL.N) fell more than 13% after the cloud services firm anticipated below-target current-quarter sales.
On the Reuters news, the euro was supported at $1.0753, hitting one-week highs, and markets now favor a 75% likelihood of an ECB rate rise on Thursday, up from a 50/50 chance.
According to the Reuters story, “The leak raises the possibility of a hawkish hike which would be much more supportive for the EUR,” said Standard Chartered global head of G10 FX analysis Steve Englander.
“Our fundamental opinion is that the ECB will hold and be discouraged by lackluster growth from additional rises… We believe it’s near.”
The Japanese currency rose 0.2% to 147.35 yen as Japan’s top central banker suggested an early departure from its zero interest rate policy.
On Wednesday, the two-year note reached 5.0263%, up from 5.005% in the U.S. Ten-year rates rose to 4.2842% from 4.264%. Gold stayed at $1,911.29 per ounce.
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