Asian stock markets wary ahead of ECB meeting, US inflation data

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Asian stocks fell on Monday ahead of a week filled with central bank meetings and US inflation data, while the euro gained ground on relief that the far right did not win the first round French presidential elections.

French leader Emmanuel Macron and his challenger Marine Le Pen qualified on Sunday for what promises to be a hotly contested runoff in the April 24 presidential election.



A victory for Le Pen would be a similar jolt to Britain’s Brexit vote to leave the European Union (EU). The result was close enough to leave the euro just a little firmer at $1.0888, after an initial rise to $1.0950.

The mood in equity markets was cautious, with MSCI’s broadest Asia Pacific ex-Japan equity index losing 0.1%. The Japanese Nikkei fell 0.6%, after losing 2.6% last week.

S&P 500 stock futures and Nasdaq futures both fell 0.2% in early trading. Earnings season kicks off this week with JP Morgan, Wells Fargo, Citi, Goldman Sachs and Morgan Stanley all due to report.

Wall Street has so far done surprisingly well in the face of a massive bond sell-off that saw 10-year Treasury yields jump 31 basis points last week to 2.72%. [US/]

Markets rushed to gauge the risk of ever-bigger rate hikes from the Federal Reserve, with futures implying 50 basis point hikes at the May and June meetings.

BofA US economist Ethan Harris now expects half-point hikes at each of the next three meetings and a cycle peak around 3.25-3.50%.

“If inflation appears to be heading below 3%, then our current call should be hawkish enough,” Harris said in a note. “Conversely, if inflation remains stuck above 3%, the Fed will have to rise until growth falls near zero, risking a recession.”

All of this underscores the importance of the March US consumer price report, where the median forecast is for a stratospheric 1.2% rise, pushing annual inflation to 8.5%.

Inflation will also be front and center at Thursday’s European Central Bank meeting, where the risk is for a hawkish tilt to the statement.

“Inflation has jumped well above what the ECB thought it would be just a month ago,” noted analysts at TD Securities. but not quite committed, a hike in June.”

Still on the tightening theme, the central banks of Canada and New Zealand may well raise rates by 50 basis points during their policy meetings this week. [CA/INT] [NZ/INT]

The outsized rise in Treasury yields saw the dollar index in the top 100 for the first time since May 2020, and it last traded at 99.785.

The main victim was the yen, with the Bank of Japan remaining determined to maintain its super accommodative policy and bond yields near zero. The dollar was up at 124.37 yen, after gaining 1.5% last week to sit just below its recent high of 125.10.

In commodity markets, thermal coal was the big winner last week rising nearly 13% after the EU banned imports of Russian coal.

Gold managed a weekly gain of 1.1% but was undermined by the huge rise in bond yields and was flat at $1,944 an ounce. [GOL/]

Oil prices remained under pressure after global consumers announced plans to release crude from strategic stocks and as Chinese lockdowns continued. [O/R]

Early Monday, Brent was down $1.51 to $101.27, while U.S. crude lost 1.48 cents to $96.78.

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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