Asian stocks struggle to extend Wall Street rally: Markets wrap

Stocks in Asia struggled for momentum as a rally in China took a breather and a round of robust wage-hike deals in Tokyo spurred bets that the Bank of Japan’s interest-rate hike is imminent.

Shares in mainland China slipped, with Country Garden Holdings Co.’s missed bond payment weighing on developers. The Hang Seng China Enterprises Index advanced to take gains since a recent low to nearly 20%. US and European equity contracts were little changed after a record-breaking session.

Japanese equities declined while the yen edged up as Toyota Motor Corp and a slew of other companies agreed to pay increases, adding to signs of a sustainable wage-price cycle. Investors are on the lookout for this week’s union pay deals to determine whether the price pressure will be strong enough for the BOJ to raise interest rates as early as next week.

The report on Toyota “strengthened speculation of a BOJ policy revision, leading to a strengthening of the yen and an overall decline in stocks,” said Masahiro Yamaguchi, a senior market analyst at SMBC Trust & Banking Ltd. Still, as Toyota has the biggest impact among all the spring wage negotiations, “there will unlikely be further news that will drag the market lower,” he added.

The yield on 10-year Treasuries fell one basis points after advancing following a $39 billion sale of 10-year notes. A Bloomberg dollar gauge was little changed after rising for the first session in March.

Traders held on to Federal Reserve rate cuts for this year even after US inflation came in higher than expected. The relative sense of calm in the face of a strong print was unusual, marking a break from how stocks have traded on CPI days since the Fed started lifting rates.

An S&P 500 move of 1% or more has only happened on a handful of occasions on the day of the CPI release since March 2022. Most of the time, however, gains were on the back of lower — not higher — core inflation.

The Fed is widely expected to hold interest rates steady for a fifth straight meeting when policymakers gather March 19-20. Much of the focus by investors will be on the Federal Open Market Committee’s quarterly forecasts for rates, including whether fresh employment and inflation figures have prompted any changes.

In the corporate world, Cathay Pacific Airways has finally shaken off the lingering effects of the pandemic, reporting a record operating profit. Elsewhere, China Vanke is in talks with banks on a debt swap that would help the cash-strapped developer stave off its first-ever bond default, according to people familiar with the matter.

In other markets, oil advanced after four days of losses as an industry report pointed to shrinking US crude stockpiles, offsetting wavering OPEC cuts. Gold held a decline that snapped a record-breaking run of gains after the hotter-than-expected US inflation print.

Key events this week:

Eurozone industrial production, Wednesday
ECB Governing Council member Yannis Stournaras speaks, Wednesday
Volkswagen, Adidas earnings, Wednesday
US PPI, retail sales, initial jobless claims, business inventories, Thursday
China property prices, Friday
Japan’s largest union federation announces results of annual wage negotiations, just ahead of Bank of Japan policy meeting, Friday
Bank of England issues inflation survey, Friday
US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday

Some of the main moves in markets: