Asian equity markets are showing a mixed start on Wednesday, following Wall Street's largely indifferent response to a recent U.S. inflation report. The report reinforced speculation that the Federal Reserve may halt its rate hikes, but also indicated that the cycle is not yet complete.
In Asia, futures contracts for Hong Kong and Australia pointed to slight losses, while Japan is expected to gain. Japanese and Australian bond futures suggest yields will follow U.S. Treasuries slightly lower.
On Tuesday, two-year Treasury yields in the U.S. fell below 5%, and the dollar edged lower. The core consumer price index (CPI), which excludes food and energy costs, increased 0.3% from July - marking the first acceleration in six months. From a year ago, it rose 4.3%, aligning with estimates and marking the smallest advance in nearly two years. However, this figure still exceeds the Federal Reserve's 2% target.
Market swaps tied to the next two Federal Open Market Committee meetings continued to predict little chance of a rate hike next week, and approximately 50% odds of one in November. "While the markets believe the Federal Reserve is done with its rate hiking cycle, the likelihood of another rate increase cannot be dismissed," said Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin (OTC:BDNHF) in London. She added that recent data releases suggest interest rates will remain high for some time.
On Wall Street, the S&P 500 remained largely unchanged while the Dow Jones Industrial Average lagged behind. American Airlines (NASDAQ:AAL) Group Inc., led U.S. stock losses after lowering its earnings outlook due to a surge in jet fuel prices. Most megacaps rose, with leaders from five of the ten largest U.S. companies attending a closed-door Senate meeting to discuss regulation of artificial intelligence. Meanwhile, Apple Inc (NASDAQ:AAPL).'s shares fell as China identified security issues with iPhones.
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