By Gina Lee
Investing.com – Asia Pacific stocks were mixed on Thursday morning, while U.S. equity futures were on an upward trend, as a continuous debate around whether inflation is peaking saw a rally in U.S. Treasuries.
Japan’s Nikkei 225 jumped 1.16% by 10:02 PM ET (2:02 AM GMT) and South Korea’s KOSPI gained 0.61%.
In Australia, the ASX 200 edged up 0.19%, while Hong Kong’s Hang Seng Index was down 0.40%.
China’s Shanghai Composite edged down 0.11% and the Shenzhen Component was down 0.21%, with investors continuing to assess the likelihood of further policy support. The Nasdaq Golden Dragon China Index of Chinese shares traded in the U.S. dropped almost 5%.
S&P 500 and Nasdaq 100 futures were up, boosted by positive earnings from Tesla Inc. (NASDAQ:TSLA) and United Airlines Holdings Inc. (NASDAQ:UAL)
Rate markets also saw a sharp repricing, with long U.S. bond yields dropping as investors including the Bank of America (NYSE:BAC) and Nomura Asset Management touted a buying opportunity after the recent rout. Ten-year yields continued to fall, with healthy demand at a 20-year bond auction adding fuel to the rally.
The debate as to whether inflation is peaking continues but is unlikely to deter central banks from tightening monetary policy, with commodity shortages due to the war in Ukraine keeping prices elevated.
A case in point, New Zealand’s consumer price index (CPI), which grew at the fastest pace in 32 years. The CPI grew 6.9% year-on-year and 1.8% quarter-on-quarter in the first quarter of 2022.
Meanwhile, U.S. 10-year real yields briefly turned positive on Wednesday for the first time since March 2020. Increasing bets on aggressive Fed interest rate hikes are also sounding warnings for risk assets.
“There are still some risks right now,” abrdn multi-asset solutions investment director, Asia Pacific, Ray Sharma-Ong told Bloomberg.
“It’s not over. We do still see some risk of 10-year yields pushing higher on the back of this uncertainty,” as investors await details on the Fed’s timeline for shrinking its balance sheet, he added.
The U.S. economy grew at a moderate pace through mid-April 2022, but rising prices and geopolitical developments created uncertainty and clouded the outlook for future growth, according to the Fed’s Beige Book released on Wednesday.
“Strong demand allowed firms to pass through input cost increases in consumers,” Commonwealth Bank Of Australia strategist Carol Kong said in a note.
“The anecdotal evidence supports our view the Fed is well behind the curve and needs to tighten policy aggressively.”
Investors now await comments from Fed Chairman Jerome Powell and European Central Bank President Christine Lagarde at an International Monetary Fund event later in the day. Bank of England Governor Andrew Bailey will follow a day later.
On the data front, the eurozone CPI is due later in the day. The eurozone, French, German, and British manufacturing purchasing managers indexes are due to follow on Friday.