Asian Stocks to Gain, Treasuries Rally Into US PCE: Markets Wrap

Equities in Asia followed gains in US stocks and Treasuries ahead of the Federal Reserve’s preferred inflation gauge due Friday.

Shares in Japan’s benchmark Topix index were set for a 34-year high. South Korean stocks climbed, while futures for Hong Kong were slightly lower. The moves follow a downbeat day in the prior session when a gauge of the region’s stocks fell for the first time in three days. Contracts for US equities edged higher after megacaps were mixed Thursday with Amazon.com Inc. rising and Nvidia Corp. falling.

President Joe Biden and former President Donald Trump prepared to face off in their first 2024 debate late Thursday in the US. Their different approaches to areas including taxes, electric cars and cryptocurrencies may result in market swings.

Treasuries held gains from the prior session, when lackluster US economic data reinforced speculation the Fed will cut interest rates this year to prevent a bigger slowdown in the economy. The 10-year Treasury yield fell four basis points to 4.29% on Thursday.

The US government marked down personal spending to an annualized 1.5% in the first quarter. Separate releases showed declines in orders and shipments of certain business equipment, weakness in the job market and a slide in homebuying.

“We expect both consumer and business activity to slow in the latter half of 2024, giving the Fed ample opportunity to begin cutting rates later this year,” said Jeff Roach, Chief Economist at LPL Financial.

US PREVIEW: May PCE Inflation to Offer Welcome News for Fed

Meanwhile, India is preparing itself for the inclusion of the nation’s government bonds into JPMorgan Chase & Co. emerging markets index on Friday, opening up a $1.3 trillion market to a broader range of investors.

The yen was little changed in early trading, keeping it broadly near an almost four-decade low against the dollar achieved on Wednesday. An index of greenback strength was flat Friday to remain near the highest level since November.

One Rate Cut

Fed Bank of Atlanta President Raphael Bostic said he continues to expect one rate reduction this year amid signs inflation has resumed its decline. His projection echoes that of the Federal Open Market Committee. Earlier this month, Fed officials penciled in just one rate reduction for 2024, according to the median forecast.

Swap markets are pricing in about 45 basis points of easing in 2024, which would equate to less than two cuts.

Economists expect data Friday to show that the Fed’s preferred gauge of underlying inflation slowed to an annualized rate 2.6% last month from 2.8%. While that’s the lowest reading since March 2021, it remains above the Fed’s goal for 2% inflation.

“A consensus move would conform with the narrative that the early-2024 reflationary pressures are fading, and the cooling trend seen during the second half of 2023 has once again resumed in the second quarter,” said Ian Lyngen and Vail Hartman at BMO Capital Markets. “Perhaps more importantly, investors are anticipating a round of inflation data that offers incremental support for a September rate cut.”

In late New York trading, Nike Inc. sank as sales missed estimates. Walgreens Boots Alliance Inc. tumbled 22% in regular hours after slashing its guidance. Chewy Inc. and Petco Health and Wellness Co. whipsawed as Keith Gill — known as “Roaring Kitty” — posted a cartoon image of a dog on X.

In commodities, oil was set to advance for a third session on Friday while gold held onto Thursday’s gains.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

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