Asian stock markets, euro hold steady ahead of US inflation data

Asian equities consolidated recent gains as investors' sentiment improved amid strong results by U.S. companies, helping stocks recover from the worst start to the year since 2016, while a resurgent euro paused ahead of U.S inflation data.

Markets are still alert for rate increases in both the euro zone and the United States after the European Central Bank last week was considered to have adopted a more hawkish tone.

Euro zone yields rose sharply on Monday with Italian bond prices underperforming their peers. The United States has reported stronger-than-expected jobs and earnings data. MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.05% to 614.6 after rising to 617.7, the highest since January 25. The benchmark is now up about 3% from a more than one-year low of 595.99 struck on Jan 27.

"Much of investors' concern is focused on the five Fed increases that markets are pricing in for 2022, and if they won't be sufficient to contain inflation," Seema Shah, chief strategist at Principal Global Investors, said in a note.

"Yet, the Fed's urgency to tighten should soon ease as the most acute economic price pressures start fading. Furthermore, while U.S. growth has likely peaked, a recession isn't in the cards," she said.

Japan's Nikkei rose 0.4%, Korean stocks went up 0.7% and Taiwan gained 0.6%. Hong Kong stocks figured among the losers, with the Hang Seng index falling 0.7%.

S&P 500 futures were steady and Nasdaq futures edged up 0.06%.

The MSCI World index fell 6.2% in January - the worst start to the year since 2016.

U.S. consumer price figures for January are due on Thursday and could show core inflation accelerating to the fastest pace since 1982 at 5.9%.

Major Wall Street stock indexes were mixed throughout the session on Monday before ending down as markets digested mixed quarterly results from megacaps Amazon.com Inc and Facebook owner Meta Platforms. The Dow Jones Industrial Average ended flat, while the S&P 500 lost 0.37% and the Nasdaq Composite dropped 0.6%. Of the 278 companies in the S&P 500 that have posted earnings as of Friday, 78.4% reported above analysts' expectations, according to Refinitiv data.

"Corporate profits are the strongest in decades, consumers are backed by excess savings, and gradual supply chain normalization should provide a boost to inventories and production," Shah of Principal Global Investors said.

The U.S. January payrolls report on Friday showed annual growth in average hourly earnings climbed to 5.7%, from 4.9%, while payrolls for prior months were revised up by 709,000 to radically change the trend in hiring.

In foreign exchange markets, the euro inched down 0.1%, having shot up 2.7% last week in its best performance since early 2020 on the tightening expectations.

The euro has held gains but has been unable to beat resistance around $1.1483 even as European bond yields have leapt and last bought $1.1441.

The dollar crept 0.1% higher on the yen to 115.27 and the U.S. dollar index stayed at 95.457. Treasury yields hovered close to pandemic highs, with the benchmark 10-year yield up 1.6 basis points to 1.9358%.

Oil prices eased on Tuesday ahead of talks between the United States and Iran officials, which could lead to the removal of U.S. sanctions on Iranian oil sales.

Brent crude was last down 0.4% to $92.29 a barrel after hitting a seven-year high of $94 on Monday. [O/R] Spot gold prices were steady at a 1-week high at $1,822 per ounce.

 

(Reporting by Anshuman Daga; Additional reporting by Tom Westbrook. Editing by Gerry Doyle)