Stocks settle into nervous wait on US CPI

MSCI Asia index excluding Japan stable; S&P 500 futures flat
Dollar/yen falls to 151.7
Investors await decision on US inflation and Canadian rates

SINGAPORE, Dec 11 (Reuters) – Asian stock markets and the dollar took a breather on Wednesday ahead of an interest rate cut in Canada and a U.S. inflation reading that is expected to leave the Fed on track to cut rates again.

Investors were somewhat cautious as, with an 85% chance of a US rate cut next week and with Wall Street indexes near record highs, there is room for disappointment.

The S&P 500 had fallen 0.3% overnight, although it is now only 65 points away, or just under 1% from its all-time high.

US futures were up 0.1% in Asian morning trading. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS)open a new tab was flat and the Nikkei of Japan (.N225)open a new tab fell 0.4%.

American steel (XN)open a new tab shares had fallen nearly 10% overnight according to a Bloomberg News report suggesting that Nippon Steel (5401.T)open a new tab The $15 billion takeover bid would be blocked.

Hong Kong (.HSI)open a new tab and China (.CSI300)open a new tab Stocks held steady, after giving back gains as traders toned down their enthusiasm over a result showing the Politburo had changed monetary policy and sought to boost consumption.

The median forecast of economists polled by Reuters is for U.S. consumer prices to rise 0.3 percent, month over month, for November. No forecast was higher than 0.3%, which analysts say leaves markets vulnerable to a surprise.

“The 0.4% case is a barnburner,” said Brent Donnelly, a trader and president of analytics firm Spectra Markets.

“The goal is to buy US dollars and sell stocks at a rate of 0.4% and do nothing else.” The dollar is expected to rise if markets slow the speed and depth of expected U.S. rate cuts.

Analysts at the Commonwealth Bank of Australia think the dollar index will likely fall towards 105.1 if inflation meets expectations, but could rise as high as 108.1 if core inflation hits 0.4%. or more.

The index was last at 106.36.

US yields rose slightly and benchmark 10-year yields remained stable in Asia at 4.2302%.

ADVANCE CUTS

The Canadian dollar hit a 4-1/2 year low on Tuesday and, at C$1.4168 per dollar, was close on Wednesday as traders saw an 89% chance of a massive 50-point rate cut base later Wednesday.

Canada has already cut rates by 125 basis points this cycle, but last week’s announcement that Canada’s unemployment rate hit an eight-year high of 6.8% in November led to bet on additional cuts of 50 basis points, which would bring the overnight rate to 3.25. %.

Broader foreign exchange markets remained stable, with the euro at $1.0533 and the yen at 151.70 to the dollar.

Markets have fully priced in a rate cut from the European Central Bank on Thursday and a 61% chance of a 50 basis point cut from the Swiss National Bank, which would help dampen a rally in the franc.

On Tuesday, Australia’s central bank left rates unchanged, as expected, but dropped a veiled reference to the possibility of a future rate hike and sent the Australian dollar sharply lower.

The Aussie suffered a 1% decline from the previous session to $0.6381 on Wednesday, while the Kiwi also took a beating and bought $0.5798.

China’s resumption of gold purchases for its reserves appears to have helped spot prices break a recent range and gold was above its 200-day moving average at $2,700 an ounce on Wednesday.

In other commodity markets, a brief boost from China’s policy shift appeared to have passed and oil prices remained broadly stable, with Brent crude futures at $72.48 a month. barrel.

Arabica coffee prices hit a record just above $3.48 a pound on Tuesday, as dealers fear a drought could reduce production in Brazil’s top producer.

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