Asia: Markets mixed ahead of US inflation data, Fed decision

ASIAN markets diverged on Monday as investors awaited key US data and a Federal Reserve policy decision after labour figures last week suggested the US central bank was on course to deliver a soft landing for the economy while reining in inflation.

A forecast-beating read on jobs on Friday - and a pick-up in consumer sentiment - tempered expectations for interest rate cuts in the new year but were not enough to jolt confidence that decision-makers have finished with their tightening cycle.

Readings on consumer prices and retail sales are due this week, as is the Fed’s meeting and boss Jerome Powell’s statement, which will be parsed for indications of officials’ plans.

Investors will also be keeping an eye on decisions by the European Central Bank and Bank of England this week.

“The run of data that preceded Friday’s non-farm payrolls data has mostly been softer, and equity markets appeared willing to overlook NFP as an outlier,” said IG Australia’s Tony Sycamore.

“However, the equity market is unlikely to be so forgiving if it gets another fright this week from either CPI, the (policy) meeting, or retail sales,” he said, referring to the consumer price index.

Stephen Innes at SPI Asset Management said the Fed was walking a thin line.

“On the one hand, there’s the concern that they might act too slowly to ease policy, leading to an economic downturn under the strain of higher interest rates, resulting in significant job losses for millions of people,” he wrote.

“On the other hand, there’s the fear of easing too early, which could result in inflation settling above three per cent.”

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He added: “Hopefully, by the week’s end, investors will have some clarity on the Federal Reserve 2024 playbook.”

All three main indexes on Wall Street rose Friday, but Asian traders struggled to extend the rally, with sentiment jarred by figures showing China slipped further into deflation last month as leaders struggle to kickstart the stuttering economy.

Tokyo, Sydney, Seoul and Taipei rose but Hong Kong, Shanghai, Singapore, Wellington, Manila and Jakarta dropped.

The dollar extended Friday’s advance against the yen, having fallen sharply to a four-month low in the middle of last week on bets the Bank of Japan is about to shift away from its ultra-loose monetary policy. AFP