Asian equities look set for a cautious open Wednesday as global markets gear up for a key inflation report that’s expected to bring insights on the outlook for the Federal Reserve’s benchmark interest rate. Oil held gains amid strains in global supplies.

Futures for Japanese and Australian shares pointed to marginal declines while contracts for Hong Kong rose slightly and a gauge of US-listed Chinese companies was little changed.

A rout in technology companies dragged down the US stock market, with the Nasdaq 100 falling 1.1%. Apple Inc., which unveiled the iPhone 15 and other products, dropped almost 2%. The S&P 500 slid 0.6%.

The advance in crude sent energy shares higher and added to concern about inflationary pressures. Oil was down just 0.1% early Wednesday after reaching a 10-month high in the previous session as production cuts by leaders of the OPEC+ contribute to projections for the tightest crude in a decade in the months ahead.

Treasury two-year yields, which are more sensitive to imminent Fed moves, topped 5%. An auction of 10-year US Treasury notes on Tuesday drew the highest yield since 2007 — a day after a sale of three-year notes did the same — as investors demand increased compensation for elevated inflation and growth in the supply of US government debt. The dollar inched lower Wednesday while the yen and other major currencies traded in narrow ranges.

With the US economy defying pessimism and energy prices rising, Wednesday’s consumer-price index is expected to show a pick-up in inflation pressures. Swap traders are currently betting the Fed will stay on hold at a policy meeting next week, and see roughly a 50% chance that it delivers a hike in November.

“In our view, it may be a good moment for investors to consider allocation moves that prepare for a re-firming of inflation this fall,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “For example, cyclical growth equity sectors soared on hopes of a divine disinflation and near-term Fed cuts. Yet, if inflation re-emerges, these sectors might give up some of their year-to-date gains.”

The Cleveland Fed’s Nowcast model suggests upside risks for CPI, with persistently high inflation seen in September as well, according to Win Thin, global head of currency strategy at Brown Brothers Harriman.

CPI is key because if it halts its downward trend, markets will have to price in a more hawkish Fed — and that would be a headwind on stocks, said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.

“Put in a more familiar way, CPI impacts two of the three pillars of the rally: disinflation and expectation the Fed is done with rate hikes,” Essaye noted. “If CPI is too hot, both will be damaged.”

Meantime, there’s been a “dramatic shift” in investors’ equity allocation — a rush toward the US and an exodus from emerging markets, Bank of America Corp.’s latest global fund manager survey showed.

That’s had an impact on emerging markets equity allocation, which fell to a net 9% overweight in September from 34%, the lowest reading since November 2022. In contrast, allocation to US equities rose 29 percentage points to a net 7% overweight — the first overweight reading since August last year, according to the survey.

Key events this week:

• Japan PPI, Wednesday
• Eurozone industrial production, Wednesday
• UK industrial production, Wednesday
• US CPI, Wednesday
• Tech leaders including Tesla’s Elon Musk and Meta Platforms’ Mark Zuckerberg are set to attend a forum on the future of AI convened by Senator Chuck Schumer, Wednesday
• Japan industrial production, Thursday
• European Central Bank policy meeting and news conference by President Christine Lagarde, Thursday
• US retail sales, PPI, business inventories, initial jobless claims, Thursday
• China property prices, retail sales, industrial production, Friday
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 8:05 a.m. Tokyo time. The S&P 500 fell 0.6%
• Nasdaq 100 futures were little changed. The Nasdaq 100 fell 1.1%
• Nikkei 225 futures fell 0.2%
• Australia’s S&P/ASX 200 Index futures fell 0.3%
• Hang Seng Index futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.0755
• The Japanese yen was little changed at 147.07 per dollar
• The offshore yuan was little changed at 7.3003 per dollar
• The Australian dollar was little changed at $0.6428

Cryptocurrencies

• Bitcoin fell 0.6% to $25,919.43
• Ether fell 0.3% to $1,594.46

Bonds

• The yield on 10-year Treasuries was little changed at 4.28%
• Australia’s 10-year yield was little changed at 4.16%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Rita Nazareth.