Asian stocks were steady Tuesday as traders evaluated a record-high close for U.S. equities and awaited key central bank decisions amid concerns about elevated inflation.
A Hong Kong index of Chinese technology stocks jumped, while a climb in Samsung Electronics Co. bolstered South Korean shares. U.S. and European futures slipped after optimism over corporate earnings saw the S&P 500 hit a new peak and the Dow Jones Industrial Average touch 36,000 for the first time.
In Australia, the central bank scrapped its bond-yield target. The nation’s currency dropped after Governor Philip Lowe said it was still “likely to take some time” for inflation to sustainably return to target. Yields on three-year and 10-year debt declined.
The U.S. 10-year Treasury yield and the dollar were little changed ahead of the Federal Reserve meeting. The policy review comes amid price pressures stoked by the most-widespread U.S. supply crunch since the oil crisis of 1973. The Fed is expected to announce a tapering of its bond-purchase program.
The earnings season has underpinned the equity market, countering worries about inflation and tighter monetary policy. But pandemic-era supply-chain challenges coupled with higher energy costs could become a bigger test if they feed into wider, more enduring price pressures.
“We expect volatility in financial markets to remain high as not only the Fed, but other central banks around the world, extract liquidity to combat the rise in inflation,” Lon Erickson, portfolio manager at Thornburg Investment Management, wrote in a note. Despite Fed rhetoric, “we’ve started to see the market price in earlier policy rate moves, perhaps losing confidence in the ‘transitory’ nature of inflation.”
Bank of England policy makers head into their Nov. 4 gathering knowing that a failure to deliver a once-unthinkable interest-rate hike would raise questions over their credibility with markets.
In the U.S., more than 80% of companies in the S&P 500 reporting third-quarter results have topped Wall Street estimates. At the same time, data showed supply-chain bottlenecks weighed on the nation’s manufacturers in October.
President Joe Biden’s $1.75 trillion tax and spending package appeared to hit a fresh challenge, after Senator Joe Manchin said Congress needs more time to assess its impact.
Elsewhere, iron ore futures extended losses below $100 a ton on expectations of lower Chinese steel output. Oil traded around $84 a barrel. Bitcoin edged up to $61,400.