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Shares fall in Asia, which provides support for CPI and earnings

  • S&P 500 futures down 0.5%, Nikkei futures ease
  • Markets braced for high US core CPI, earnings season
  • Wary of possible Russian response to bridge attack
  • Japan, South Korea on holiday, financial markets closed

SYDNEY, (Reuters) – Shares fell in Asia on Monday after a surprise drop in U.S. unemployment halted any thought of a key policy tightening ahead of an inflation reading expected to see core prices rise again.

Geopolitical tensions added to uncertainty as markets waited to see how the Kremlin might respond to the explosion that hit Russia’s only bridge to Crimea. read more read more

Holidays in Japan and South Korea created thin trading in Asia, while financial markets are also closed on Monday.

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S&P 500 futures led early action with a 0.5% drop, while Nasdaq futures fell 0.6% as the US earnings season kicks off later this week.

Nikkei futures traded at 26,615 compared with Friday’s cash close of 27,116 (.N225).

Wall Street sank on Friday after an upbeat payrolls report appeared to seal the deal on another outsized rate hike by the Federal Reserve. read more

Futures imply a more than 80% chance of interest rates rising by 75 basis points next month, while the European Central Bank (ECB) is expected to match that and the Bank of England to rise by at least 100 basis points. ,

“We are in the midst of the largest and most synchronized tightening of global monetary policy in more than three decades,” said Bruce Kasman, head of economic research at JPMorgan, who expects hikes of 75 basis points from all three central banks.

“The September CPI report should show a moderation in commodity prices which is a likely harbinger of a broader decline in core inflation,” he said. “But the Fed won’t respond to whispers of inflation moderation as long as labor markets are crying out for tightening.”

Overall consumer price growth is seen slowing to an annual 8.1%, but the core target is estimated to accelerate to 6.5% from 6.3%. The US CPI data will be released on Thursday at 8:30 a.m. ET (1230 GMT).

The minutes from the Fed’s latest policy meeting are also out this week and are likely to sound hawkish given how many policymakers lifted their dot-plot forecasts for interest rates.


Wall Street is also facing a test of corporate earnings with the big banks starting the season on Friday, including JPMorgan, Citi, Wells Fargo and Morgan Stanley.

“Consensus expects 3% y/y EPS growth, 13% sales growth and 75bp margin contraction to 11.8%,” analysts at Goldman Sachs said in a note. “Excluding energy, EPS is expected to fall by 3% and margins to contract by 132 bp.”

“We expect less positive surprises in 3Q compared to 1H 2022 and negative revisions to 4Q and 2023 consensus estimates.”

A likely point of contention will be the strength of the dollar which will pressure earnings offshore.

The dollar index was flat at 112.75 after rising for the past three sessions. It stood at 145.34 yen, but had so far avoided the recent 24-year high of 145.90 on fears of Japanese intervention.

The euro looked vulnerable at $0.9734, having retreated from a peak of $0.9999 last week.

Sterling was slightly better at $1.1089, with traders on edge as the Bank of England is set to end its emergency bond-buying campaign on Friday.

Yields on 10-year bonds are still up at 4.237% and well off the 3.31% level held before the UK mini-budget sent the market into a tailspin.

The rise in the dollar and yields have weighed on gold, which hovered at $1,694 an ounce.

Oil prices rose after Brent rose 11% last week in the wake of an OPEC+ supply cut deal.

Brent gained 12 cents to $98.04 a barrel, while US crude rose 21 cents to $91.85 a barrel.

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Reporting by Wayne Cole; editing by Diane Craft

Our standards: Thomson Reuters Trust Principles.

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