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(Bloomberg) -- The rally in Asian equities halted as Treasury yields surged after the latest US inflation data bolstered bets on Federal Reserve rate hikes. Latest data on continued weakness in China’s economy added to the gloom. (Bloomberg) -- The rally in Asian equities halted as Treasury yields surged after the latest US inflation data bolstered bets on Federal Reserve rate hikes. Latest data on continued weakness in China’s economy added to the gloom. MSCI’s Asia Pacific Index fell about 0.9%, on course to snap a six-day winning streak, with the region’s benchmark indexes in the red. Hong Kong and mainland Chinese shares extended losses from the open after both consumer and producer prices came in below estimates, a sign that the country’s economy still faces drags despite recent support measures. Investors will parse China trade data due later Friday for further clues on the health of the economy. US contracts were little changed after the S&P 500 slid for the first time in five days, with banks underperforming ahead of earnings from JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. Friday. Treasuries gained slightly in Asia after dropping across the curve in the previous session, with the yield on the 30-year rate surging as much as 19 basis points after a $20 billion auction of the securities drew weak demand. The dollar steadied after strengthening against all of its Group-of-10 peers Thursday following the increase in Treasury yields. The yen inched closer to the 150 mark. Meanwhile, swap contracts pushed the odds of another quarter-point Fed hike to about 40% — from closer to 30% Wednesday after the so-called core consumer price index, which excludes food and energy costs, increased 0.3% in the US last month. From a year ago, it rose 4.1%, the lowest since 2021. Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI, which rose 0.4%, boosted by energy costs. Forecasters had called for a 0.3% monthly advance in both measures. The Fed will want flexibility optionality around an additional rate hike, “just given the fact that inflation could stall out at a higher level,” Nadia Lovell, senior equity strategist at UBS Global Wealth Management, said on Bloomberg Television. “It’s a much easier to tilt hawkish in an environment where economic growth is strong and then dial that back if you need to than to be dovish just in case inflation surprises to the upside.” Elsewhere, oil headed for a modest weekly gain as fears over the Israel-Hamas conflict were offset by signs of flagging demand. Gold steadied. WATCH: JPMorgan Asset Management Chief Global Strategist David Kelly says the uptick seen in the September CPI report is “not really” changing his mind on the ultimate path of US inflation.Source: Bloomberg Key events this week: China trade, Friday Eurozone industrial production, Friday US University of Michigan consumer sentiment, Friday Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday G20 finance ministers and central bankers meet as part of IMF gathering, Friday ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday Fed’s Patrick Harker speaks, Friday Some of the main moves in markets: Stocks S&P 500 futures were little changed as of 10:39 a.m. Tokyo time. The S&P 500 fell 0.6% Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.4% Japan’s Topix fell 0.9% Hong Kong’s Hang Seng Index fell 1.6% China’s Shanghai Composite Index fell 0.7% Australia’s S&P/ASX 200 Index fell 0.3% Currencies The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.0539 The Japanese yen was little changed at 149.80 per dollar The offshore yuan was little changed at 7.3106 per dollar The Australian dollar was little changed at $0.6320 Cryptocurrencies Bitcoin rose 0.3% to $26,815.32 Ether rose 0.4% to $1,542.29 Bonds The yield on 10-year Treasuries declined three basis points to 4.67% Japan’s 10-year yield advanced 1.5 basis points to 0.765% Australia’s 10-year yield advanced 11 basis points to 4.48% Commodities West Texas Intermediate crude rose 0.7% to $83.46 a barrel Spot gold rose 0.2% to $1,871.71 an ounce This story was produced with the assistance of Bloomberg Automation. --With assistance from Stephen Kirkland. More stories like this are available on bloomberg.com ©2023 Bloomberg L.P.
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