LONDON: Japanese shares hit a 34-year high on Tuesday, while European stocks and S&P 500 futures fell as investors waited for a Inflation in the USA report that could shape Federal Reserve Policy.
Treasures and the dollar changed little before the inflation numbers. Bitcoin remained just above $50,000 after crossing the threshold for the first time in more than two years thanks to inflows into exchange-traded funds backed by the digital asset.
from Japan Nikkeis continued to advance, rising to 38,010 on Tuesday, not far from the record 38,957 that the benchmark index reached on December 29, 1989. The Nikkei has gained more than 13% so far this year, after rising 28% in 2023.
Foreign investors flocked to the market, attracted by low valuations, changes in corporate governance and the weak yen, which made Japanese companies' products more attractive globally.
“US yields have risen year-to-date,” said Max Kettner, chief multi-asset strategist at HSBC. “In the absence of any kind of significant tightening by the Bank of Japan that would actually hurt the Japanese yen, (which) helps the export-sensitive Japanese stock market.”
The European continental Stoxx 600 index fell 0.33% in early trading, after rising 0.54% on Monday, as investors grew cautious in the face of US data. Germany's DAX stock index fell 0.72%.
Britain's FTSE 100 fell 0.15%, while the pound rose 0.1%, after data showed wage growth was stronger than expected in the final three months of 2023.
US S&P 500 futures were down 0.32%, while Nasdaq futures were down 0.4%.
January US inflation data could rattle markets at 1:30pm GMT (8:30am ET). Economists polled by Reuters expect the consumer price index (CPI) to rise 2.9% year on year, down from 3.4% the previous month.
A higher-than-expected number could lift yields and further strengthen the dollar, said Charu Chanana, head of currency strategy at Saxo.
Market prices show that investors believe there is currently a 70% probability of an interest rate cut by May, “and there appears to be room to push this further into June, with markets remaining sensitive to aggressive surprises for now ” said Chanana.
Investors have scaled back their bets on rate cuts from major central banks in recent weeks as U.S. data has been stronger than expected. They now foresee cuts of around 110 basis points by the end of the year, down from around 145 basis points at the beginning of February.
The yield on the 10-year Treasury note rose slightly to 4.19%. The dollar index, which measures the U.S. currency against six rivals, was little changed at 104.24. The euro was practically stable at US$1.0761.
The Japanese yen, which is sensitive to U.S. rates, fell about 0.2% to 149.67 per dollar, not far from the closely watched level of 150 that analysts said would likely trigger more comments from Japanese officials at the attempt to support the currency.
Japan's currency has fallen about 6% against the dollar this year as investors have lowered their expectations about when the Bank of Japan will end its ultra-loose monetary policy.
In commodities, Brent oil futures were quoted at US$82.06, up 0.1% on the day.