Asia: Most markets rise as traders jockey ahead of US inflation
Equities mostly rose in Asia on Wednesday (Apr 10) following a tepid day on Wall Street, with investors lasering in on the release of crucial US inflation data that could have a huge bearing on the outlook for interest rates.
While markets reacted positively to last week’s blockbuster jobs report, which pointed to a still-strong economy, there is a nervousness on trading floors that a third successive miss to the upside on consumer prices could force the Federal Reserve to delay cutting borrowing costs.
The consumer price index “is the critical number this week”, said NatAlliance Securities’ Andrew Brenner. “The fear is that CPI has continued to be a thorn in the side of the Fed.”
He added that “positioning is strongly bearish”.
Investor expectations on rate cuts this year have been pared from six at the start of the year to three at most, with some even contemplating zero, though some suggested that no rate cuts could be the price to pay for economic health and strong earnings.
Atlanta Fed boss Raphael Bostic sounded a pragmatic note Tuesday when asked about the bank’s plans.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
He repeated his view that it would make one reduction this year but said he was open to changing his mind as the data came in.
After being asked about the chances of standing pat all year, he said: “I do think the risks are balanced and given that the US economy has been so robust and so strong and so resilient – I can’t take off the possibility that the rate cuts may even have to move further out.”
But he also said that “if I started to get different signals to suggest that there’s a lot of coming pain in the labour market side, then I’d be open to changing our policy stance and perhaps cutting sooner.”
Still, Krishna Guha at Evercore remained upbeat ahead of the CPI reading, adding that “the odds are the data will come in good enough to go ahead”.
On Wall Street, the S&P 500 and Nasdaq eked out small gains, but the Dow was marginally lower.
In early Asian trade, Hong Kong piled on more than one percent, while Sydney, Taipei and Wellington were also in the green, though Shanghai edged lower.
Tokyo was also down as a stronger yen weighed on exporters. The currency picked up against the dollar following less-than-dovish comments from Bank of Japan boss Kazuo Ueda.
The exchange rate has been closely tracked as the yen weakened towards 152 per dollar this week, which many observers consider the trigger for authorities to step in to support the Japanese currency.
The central bank last month lifted interest rates for the first time since 2007 as inflation continues to hold well above officials’ target, and speculation is growing about when it will move again.
Ueda told lawmakers Tuesday: “We have to consider reducing the degree of monetary easing if the underlying price trend rises along with our outlook.
“We will carefully consider this at every policy meeting as it depends on incoming data.” AFP
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Companies & Markets
Asia’s first spot Bitcoin and Ether ETFs gain in Hong Kong debut
Cromwell E-Reit posts 10.2% drop in indicative Q1 DPU to 3.505 euro cents
Bangkok airports set for US$4.8 billion expansion as tourism booms
Prudential’s Q1 new business profit down 2% at S$743 million
Hong Kong team plants seeds to safeguard legacy grains
Singapore Airlines could post highest-ever earnings of about S$2.7 billion for FY2024, says analyst