Asian Stocks to Rise; Long-term Yields to Fall

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Asian markets appeared set to rise Thursday following a decline in longer-term Treasury yields and the dollar as traders digested Federal Reserve minutes confirming a looming reduction in support amid inflationary pressures.

Japan’s futures nudged higher, while Australian markets rose. US contracts advanced following Wall Street’s three-day losing run, with the Nasdaq 100 outperforming the S&P 500.

A significant portion of the Treasury yield curve flattened out to a near one-year low. Annual inflation in the United States remained above 5% for a fourth month, but the Federal Reserve’s minutes indicated a tapering of asset purchases commencing in mid-November or mid-December. Meanwhile, a 30-year sale aroused much interest.

Crude oil prices have remained stable over $80 per barrel. Thursday is a holiday in Hong Kong. China’s next inflation numbers will provide additional insight into price pressures exacerbated by supply chain disruptions and a spike in energy prices.

Investors continue to assess the economic recovery’s sustainability in the face of inflationary pressures and the likelihood of diminishing central bank policy support. So far this earnings season, executives from S&P 500 businesses have uttered the term “supply chain” almost 3,000 times on investor calls – far more than last year’s then-record amount.

“The critical question will be how corporations manage the multitude of inflationary pressures in terms of profitability,” Steve Chiavarone, portfolio manager at Federated Hermes, wrote in an email. “Wage pressure, labour shortages, supply chain disruptions, increased input costs, increasing energy prices in the face of a global energy crisis, and the probability of increased interest and tax expenses may be too much for enterprises to chew.”

The Biden administration is attempting to alleviate supply chain bottlenecks in advance of the holiday shopping season, but officials recognise their options are limited. In terms of US earnings, JPMorgan Chase & Co.’s dealmakers delivered their greatest quarter to date, albeit consumer and commercial loan growth remained challenging.

Published by Zack Baharum

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