(Bloomberg) -- Asian stocks were poised for a steady open following a tepid US session as traders await key inflation data that may shed light on the path of Federal Reserve rates over the coming months.
Australian shares edged higher, while equity futures for Hong Kong and the US were little changed. Contracts for Japan rose. Chinese stocks may gain for a second day as a gauge of US-listed mainland shares climbed more than 2% after Bloomberg reported Donald Trump’s incoming team is considering gradual tariff hikes.
The dollar dropped for the first time in six sessions after the tariff report and as data showed that US wholesale inflation unexpectedly cooled. Australian bonds slipped in early Asia trading after the yield on 10-year Treasuries inched higher to 4.79%.
In the run-up to the consumer price index, the S&P 500 closed little changed after it swung between gains and losses, weighed by big tech. Options traders are bracing for the benchmark’s busiest CPI day since March 2023. The index is expected to move 1% in either direction on Jan. 15, based on the cost of at-the-money puts and calls, according to Stuart Kaiser at Citigroup Inc.
“All eyes are now on Wednesday’s CPI report, which may be the most important inflation reading in recent memory, as it will fuel the market’s Fed-obsessed sentiment,” said Chris Brigati at SWBC. “A strong inflation number adds to this idea of no cuts in 2025, and potentially even a rate hike, while a weak inflation data point may help to calm the market’s Fed fears.”
Underlying US inflation probably cooled only a touch at the close of 2024 against a backdrop of a resilient job market and steadfast economy, supporting the Fed’s go-slow approach to further rate cuts.
The report is likely to cause ripples through global markets after successive data prints indicating a robust US economy caused Treasury yields to spike as bets on Fed easing were trimmed. In Asia, stocks have dropped 2.8% this year while a gauge of the region’s currencies has slid 0.4% amid persistent dollar strength. Fears over the incoming Trump administration’s tariff policies have also weighed.
Traders will be closely watching Bank Indonesia’s policy decision later Wednesday for clues to how the region is adapting to the uncertainty of the Fed’s path and the new US administration. All economists surveyed by Bloomberg expect the central bank to keep its key rate at 6% after it made repeated interventions to stablize its currency over the past month.
“The uncertain global environment presents additional complexity to the region’s central banks fiscal and monetary dynamics,” said Alicia Chu, a portfolio manager at Standard Chartered Plc in Singapore. “With this backdrop, BI may extend its rate pause with 50 basis points of rate cuts pushed back to H2 2025.”
In South Korea, authorities made a second attempt to arrest impeached president Yoon Suk Yeol over his short-lived martial law decree in December.
Bank Earnings
Elsewhere, Eurozone industrial production data is due ahead of the US inflation reading. Wall Street is also gearing up for the unofficial start of the earnings season, with results from big banks hitting the tape on Wednesday.
Lenders including JPMorgan Chase & Co. and Wells Fargo & Co. are expected to show continued gains from trading and investment banking, which helped offset net interest income declines caused by higher deposits and sluggish loan demand.
“When it comes to big-bank earnings, net interest income is the key data point to watch,” Brigati at SWBC said. “If banks have been able to take advantage of borrowing at cheaper rates versus their loan portfolio, this is a constructive sign for the coming year.”
In commodities, oil gained after slipping from a five-month high Tuesday as Hamas and Israel tentatively agreed to a cease-fire, cooling a rally fueled by risks to Russian and Iranian supplies. Gold was steady.
Key events this week:
Some of the main moves in markets:
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This story was produced with the assistance of Bloomberg Automation.