Asian stocks hovered near record highs ahead of key US jobs data on Wednesday after weak retail sales reinforced bets that the Federal Reserve will cut interest rates later this year.
The MSCI Asia Pacific Index was little changed after two days of gains that took the gauge to an all-time high. The moves came after Wall Street benchmarks retreated on Tuesday.
Treasury futures held their gains early Wednesday after 10-year bond yields dropped to the lowest in about a month in the US session. There will be no cash trading in Treasuries during the Asian day as Japan is closed for a holiday. Gold, which typically benefits when rates are cut, edged up as money markets see slightly higher odds of three Fed cuts this year — with two already fully priced in.
Unexpectedly weak December retail sales hinted at softer consumer support for the US economy as the year ended. The data set the stage for a pivotal week, with traders bracing for the US jobs report on Wednesday and inflation figures on Friday for clues on the path for rates, even as equities waver amid concerns over technology firms' hefty spending on artificial intelligence.
The jobs report “will be key,” said Bret Kenwell at eToro. “A weak print could push sentiment further toward risk-off if growth worries start to build, but a solid print may ease some of those concerns.”
Treasury Yields Fall After Weak Retail Sales
Photo Credit: (Photo: Bloomberg)
Economists predict a 65,000 rise in January payrolls. Such an outcome would be the best in four months. The unemployment rate is seen holding at 4.4%. There will be an annual revision to the jobs count — which is expected to reveal a markdown in the year through March 2025.
On Tuesday, the S&P 500 slipped 0.3% amid weakness in several tech names, though the gauge remained near the record reached last month. The dollar wavered, while the yen led gains among Group-of-10 currencies versus the greenback. Bitcoin dropped below $70,000.
Meanwhile, Fed Bank of Cleveland President Beth Hammack said rates could be on an extended hold while officials evaluate incoming economic data. Her Dallas counterpart Lorie Logan said she's hopeful inflation will continue to come down, though it would take “material” weakness in the labor market for her to support more rate cuts.
“We expect a further two rate cuts of 25 basis points from the Federal Reserve this year,” said Mark Haefele at UBS Global Wealth Management. “Solid economic growth, in part supported by productivity gains, is supporting corporate earnings.”
Last week's steep drop in software stocks on concern about competition from artificial intelligence was likely overdone and the US economy remains poised for strong growth this year, according to Goldman Sachs Group Inc.'s chief executive officer.
“I think the narrative over the last week has been a little bit too broad,” David Solomon said Tuesday at a UBS Group AG conference in Key Biscayne, Florida. “There'll be winners and losers — plenty of companies will pivot and do just fine.”
Corporate News:
- An artificial intelligence tool aimed at creating tax strategies sparked a selloff in wealth-management stocks Tuesday as investors fear the business could be at risk from automated advice.
- Alphabet Inc. raised almost $32 billion in debt in less than 24 hours, showing the enormous funding needs of tech giants competing to build out their artificial intelligence capabilities.
- Paramount Skydance Corp. made enhancements to its hostile offer for Warner Bros. Discovery Inc., addressing some of the company's concerns in an effort to thwart a rival deal with Netflix Inc.
- Ford Motor Co. expects profit to jump in 2026 after being saddled with a surprise tariff bill at the end of last year.
- Commonwealth Bank of Australia shares climbed the most in five years after its first-half profit topped expectations, buoyed by growth in its flagship mortgage business and a push in lending more to companies.
Key Events This Week
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 9:22 a.m. Tokyo time
- Hang Seng futures rose 0.3%
- Australia's S&P/ASX 200 rose 1.1%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1890
- The Japanese yen was little changed at 154.36 per dollar
- The offshore yuan was little changed at 6.9132 per dollar
- The Australian dollar was unchanged at $0.7075
Cryptocurrencies
- Bitcoin rose 0.5% to $68,969.9
- Ether rose 0.9% to $2,026.73
Bonds
- Australia's 10-year yield declined six basis points to 4.77%
Commodities
- West Texas Intermediate crude rose 0.5% to $64.28 a barrel
- Spot gold rose 0.2% to $5,036.95 an ounce
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