(Bloomberg) — Asian stocks were mixed Friday as traders weighed the Federal Reserve’s pivot to tighter monetary policy, while U.S. equity futures climbed after strong Apple Inc. earnings bolstered sentiment.
Japanese shares rose but Hong Kong and China retreated. State-run Chinese media tried to talk up equities, arguing they offer long-term potential following a slump. Contracts on the tech-heavy Nasdaq 100 outperformed after Apple Inc. rallied in extended trading on record sales.
U.S. shares Thursday ended lower in a volatile session, again failing to hold intraday rallies. A U.S. small-cap gauge slumped into a bear market.
Treasuries were steady and the yield curve flatter. The dollar held gains, in part on solid U.S. growth data that reinforced expectations for Fed tightening to fight inflation. Oil headed for a sixth weekly advance, but gold nursed losses.
Money markets are now pricing in nearly five Fed hikes this year following Chair Jerome Powell’s hawkish tone Wednesday. That’s up from three expected as recently as December. The prospect of receding Fed stimulus is whipsawing markets: global stocks, for instance, have lost over $7 trillion this month.
“Really what we are seeing is historic intraday volatility,” Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said on Bloomberg Television. “It’s been a pretty amazing ride so far this year.”
Powell telegraphed a March liftoff and one question is whether the Fed will deliver the first half-point hike in more than two decades to counter price pressures. Investors could question the market outlook anew if expectations for such a move grow.
The U.S. stock market is priced “quite aggressively” versus other developed nations as well as emerging markets, and valuations in the latter can be a tailwind rather than a headwind as in the U.S., Feifei Li, partner and CIO of equity strategies at Research Affiliates, said on Bloomberg Television.
The latest data showed the U.S. economy expanded at a 6.9% annualized rate in the fourth quarter, capping the strongest year since the 1980s.
What to watch this week:
- Euro zone economic confidence, consumer confidence Friday.
- U.S. consumer income, University of Michigan consumer sentiment Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.4% as of 10:48 a.m. in Tokyo. The S&P 500 fell 0.5%
- Nasdaq 100 futures rose 0.8%. The Nasdaq 100 fell 1.2%
- Japan’s Topix index added 1.6%
- South Korea’s Kospi index was rose 0.5%
- Australia’s S&P/ASX 200 index rose 1.3%
- China’s Shanghai Composite index fell 0.5%
- Hong Kong’s Hang Seng index shed 0.5%
Currencies
- The Bloomberg Dollar Spot Index was steady
- The euro was at $1.1147
- The Japanese yen was at 115.46 per dollar
- The offshore yuan was at 6.3668 per dollar
Bonds
- The yield on 10-year Treasuries rose one basis point to 1.81%
- The yield on Australia’s 10-year bond fell five basis points to 1.98%
Commodities
- West Texas Intermediate crude climbed 0.3% to $86.91 a barrel
- Gold was at $1,798.59 an ounce
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