Stocks slip in Asia, brace for CPI and earnings

  • https://tmsnrt.rs/2zpUAr4
  • S&P 500 futures down 0.5%, Nikkei futures loosen
  • Markets braced themselves for a high US core CPI for the earnings season
  • Beware of possible Russian reaction to bridge strike
  • Japan, S.Korea on vacation, Treasury market closed

SYDNEY, (Reuters) – Stocks slid in Asia on Monday after a surprise drop in US unemployment dashed any thought of a pivot to tightening policy ahead of an expected inflation gauge that would see core prices are likely to rise again.

Geopolitical tensions added to uncertainty as markets waited to see how the Kremlin would react to the blast that struck Russia’s only bridge to Crimea. read on read on

Bank holidays in Japan and South Korea led to weak trading in Asia, while the Treasury market was also closed on Monday.

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S&P 500 futures led the early action, down 0.5%, while Nasdaq futures fell 0.6% as the U.S. earnings season begins later this week.

Nikkei futures traded at 26,615 compared to Friday’s close of 27,116 (.N225).

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Wall Street sank on Friday after an upbeat payroll report appeared to seal the deal for another outsized rate hike from the Federal Reserve. Continue reading

Futures imply a more than 80% chance that rates will rise by 75 basis points over the next month, while the European Central Bank (ECB) is expected to match and the Bank of England to rise by at least 100 basis points. ,

“We are in the midst of the largest and most synchronized tightening in global monetary policy in more than three decades,” said Bruce Kasman, head of economic research at JPMorgan, who expects interest rates to rise by 75 basis points from all three central banks.

“The September CPI report should show moderation in commodity prices, which is a likely harbinger of a broader slowdown in core inflation,” he said. “But the Fed won’t respond to a whisper of inflation moderation as long as labor markets cry out for tightness.”

Headline consumer price inflation is expected to slow slightly to 8.1% yoy, but the core metric is expected to accelerate to 6.5% from 6.3%. US CPI data will be released at 8:30 am ET (1230 GMT) on Thursday.

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Minutes from the Fed’s last monetary policy meeting will also be released this week and may sound hawkish given how many policymakers have upgraded their dot-plot forecasts for interest rates.

INCOME TEST

Wall Street also faces a test of corporate earnings as big banks open the season on Friday, including JPMorgan, Citi, Wells Fargo and Morgan Stanley.

“The consensus is for annual EPS growth of 3%, revenue growth of 13% and margin contraction of 75 basis points to 11.8%,” analysts at Goldman Sachs said in a note. “Excluding energy, earnings per share are expected to fall 3% and margins to close are expected to decrease 132 basis points.”

“We expect smaller positive surprises in Q3 compared to H1 2022 and negative revisions to consensus estimates for Q4 and 2023.”

A likely bone of contention will be dollar strength, which will put pressure on offshore revenues.

The dollar index was firm at 112.75 after rising for the past three sessions. It traded at 145.34 yen but had so far shied away from the recent 24-year high of 145.90 on fears of Japanese intervention.

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The euro looked vulnerable at $0.9734 after pulling back from a high of $0.9999 last week.

Sterling was little better off at $1.1089, with traders nervous as the Bank of England is set to end its emergency bond buying campaign on Friday.

10-year bond yields are still up to 4.237%, a far cry from the 3.31% level held before the UK mini-budget sent the market into a tailspin.

The rise in the dollar and yields weighed on gold, which has been floating at $1,694 an ounce.

Oil prices edged up after Brent surged 11% last week on an agreement by OPEC+ to cut supply.

Brent is up 12 cents at $98.04 a barrel, while US crude is up 21 cents at $91.85 a barrel.

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Reporting by Wayne Cole; Editing by Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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