Asian stocks stalled as upbeat US economic news clashes with global growth concerns

June 28, 2023 (MLN): Asian shares stalled on Wednesday as surprisingly upbeat U.S. economic news warred with global growth concerns, while the embattled yen hit a 15-year low on the euro and Japan hinted at intervention to prevent further losses, as Reuters reported.

The strength of U.S. data also combined with hawkish commentary from the European Central Bank to undermine bonds as markets narrowed the odds on further rate hikes.

That only heightened attention on a star-studded panel of central bankers later in the day in Portugal which includes Federal Reserve Chair Jerome Powell, ECB head Christine Lagarde and Bank of Japan Governor Kazuo Ueda.

"The U.S. data signals continued resilience in interest rate sensitive sectors, and the Fed is very clear that a period of sub-trend activity may be needed to bring inflation under control," said analysts at ANZ. "So far, that doesn't seem to be happening."

"For the ECB, senior officials signalled the need for ongoing tightening unless core inflation slows materially and a September rate hike is looking increasingly on the cards."

The rate risk kept markets cautious and MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was off 0.2%.

Chinese blue chips (CSI300) dipped 0.6% and the yuan eased anew after Beijing fixed the currency lower than many had expected, sowing confusion about whether policy makers really wanted to slow its slide.

Sentiment was not helped by a Wall Street Journal report that Washington was considering new restrictions on exports of artificial intelligence chips to China.

The report knocked Nvidia (NASDAQ: NVDA) 3% lower after the bell and dragged Nasdaq futures down 0.4%.

Yet it seemed to be welcome news for Japan's tech companies, which drove a 1.5% rally in the Nikkei (N225). Chip groups Tokyo Electron (8035T) and Advantest (6857T) led the gains.

EUROSTOXX 50 futures added 0.3% and FTSE futures 0.2%.

S&P 500 futures dipped 0.2%, though that followed solid gains on Tuesday as U.S. data on housing, durable goods orders and consumer sentiment handily topped expectations.

"The data indicated a firmer pace of residential, inventory, and equipment investment in the second quarter," wrote analysts at Goldman Sachs. "We boosted our Q2 GDP tracking estimate by 0.4pp to +2.2%."

That resilience offset recent softness in manufacturing surveys and led the market to narrow the odds on a July rate hike from the Federal Reserve.

Futures now imply around a 77% chance of a hike to 5.25-5.5%, and slightly more risk of a further move to 5.5-5.75%, which nudged short-term Treasury yields higher.

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