LONDON/SINGAPORE:Japanese stocks touched a 34-year high on Tuesday, while European shares and S&P 500 futures fell as investors awaited a report on US inflation that could shape policy the Federal Reserve.
Treasuries and the dollar were little changed ahead of 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 of exchange-traded funds backed by the digital asset.
Japan’s Nikkei continued to advance, climbing 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 percent so far this year, after increasing by 28 percent in 2023.
Foreign investors have flocked to the market, attracted by low valuations, changes in corporate governance and a weak yen that have made Japanese companies’ products more attractive globally.
“US yields have been rising since the start of the year,” said Max Kettner, chief multi-asset strategist at HSBC. “Absent any sort of significant tightening from the Bank of Japan, this will really hurt the Japanese yen, (which) will help the export-sensitive Japanese stock market.”
The continent-wide Stoxx 600 index slipped 0.33 percent in early trading, after rising 0.54 percent on Monday, as investors turned cautious ahead of the U.S. data. The German stock index DAX was down 0.72 percent.
Britain’s FTSE 100 index slipped 0.15 percent while the pound rose 0.1 percent after data showed wage growth was stronger than expected in the last three months of 2023.
US S&P 500 futures fell 0.32 percent, while Nasdaq futures fell 0.4 percent.
January US inflation data could shake up markets at 1:30 p.m. GMT (8:30 a.m. ET). Economists polled by Reuters expect the consumer price index (CPI) to rise 2.9 percent year-on-year, up from 3.4 percent the previous month.
A higher-than-expected reading could push yields higher and further strengthen the dollar, said Charu Chanana, head of currency strategy at Saxo.
Market prices show that investors currently believe there is a 70 percent chance that an interest rate cut will be achieved by May, “and it appears possible to delay this cut until “in June, with markets remaining sensitive to hawkish surprises for now,” Chanana said.
Investors have reduced their bets on rate cuts from the biggest central banks in recent weeks as U.S. data came in better than expected. They now forecast cuts of around 110 basis points by the end of the year, up from around 145 basis points at the start of February.
The yield on the 10-year Treasury note rose very slightly to 4.19 percent. The dollar index, which measures the U.S. currency against six of its rivals, was little changed at 104.24. The euro remained roughly stable at $1.0761.
The Japanese yen, which is sensitive to U.S. rates, was last down about 0.2% at 149.67 per dollar, not far from the closely watched 150 level that analysts said would likely trigger new comments from Japanese officials in an attempt to prop up the currency.
Japan’s currency has fallen about 6 percent against the dollar this year as investors pushed back expectations for when the BOJ would end its ultra-accommodative monetary policy.
In the commodities sector, Brent crude oil futures were at $82.06, up 0.1 percent on the day.