Stocks slide in Asia, brace for CPI and earnings

  • https://tmsnrt.rs/2zpUAr4
  • S&P 500 futures down 0.5%, Nikkei futures ease
  • Markets Brace for High Core CPI in US Earnings Season
  • Mistrust of a possible Russian reaction to the bridge strike
  • Japan and South Korea on vacation, Treasury market closed

SYDNEY, (Reuters) – Stocks fell in Asia on Monday after a surprise drop in unemployment in the United States quashed any hint of a pivot on policy tightening ahead of an inflation reading that is expected to see the base price increase again.

Geopolitical tensions added to the uncertainty as markets waited to see how the Kremlin might react to the explosion that hit Russia’s only bridge to Crimea. read more read more

The holidays in Japan and South Korea reduced trading in Asia, while the Treasury market is also closed on Monday.

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S&P 500 futures led the early action with a 0.5% decline, while Nasdaq futures fell 0.6% as the US earnings season kicks off later this week.

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

Wall Street sank on Friday after an upbeat payrolls report appeared to seal the deal on another outsized Federal Reserve rate hike. Read more

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

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

“The September CPI report is expected to show moderation in commodity prices which is likely a harbinger of a broader slowdown in core inflation,” he said. “But the Fed won’t be responsive to a whisper of inflation moderation as long as labor markets are crying for tightening.”

Headline consumer price inflation is expected to ease slightly to 8.1% annually, but the core measure is expected to accelerate to 6.5% from 6.3%. US CPI data will be released Thursday at 8:30 a.m. ET (12:30 p.m. GMT).

Minutes from the Fed’s latest policy meeting are also out this week and will likely look hawkish given how many policymakers have raised their rate forecasts by points.

BENEFIT TEST

Wall Street also faces a test period for corporate earnings, with major banks kicking off the season on Friday, including JPMorgan, Citi, Wells Fargo and Morgan Stanley.

“Consensus expects EPS growth of 3% year-on-year, sales growth of 13% and margin contraction of 75 basis points to 11.8%,” analysts said. Goldman Sachs in a note. “Excluding energy, EPS is expected to fall 3% and margins to contract by 132 bps.

“We expect smaller positive surprises in 3Q relative to 1H 2022 and negative revisions to consensus estimates in 4Q and 2023.”

A likely bone of contention will be the strong dollar which will put pressure on offshore earnings.

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

The euro looked vulnerable at $0.9734, having fallen from a high of $0.9999 last week.

The pound fared slightly better at $1.1089 as traders jittery as the Bank of England is set to end its emergency bond buying campaign on Friday.

Yields on 10-year bonds are still up at 4.237% and far from the 3.31% level reached before the UK mini-budget sent the market into a tailspin.

The rising dollar and yields were a drag on gold, which was hovering at $1,694 an ounce.

Oil prices rose slightly after Brent rose 11% last week following an agreement on supply cuts by OPEC+.

Brent crude firmed 12 cents to $98.04 a barrel, while U.S. crude rose 21 cents to $91.85 a barrel.

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Reporting by Wayne Cole; edited by Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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