Asian Markets Mixed as Focus Turns to US Inflation Data

AFP/APP

Hong Kong: Asian markets were mixed Monday as investors attempted to move on from last week’s upheaval, which was driven by concerns about a potential US recession. Attention is now shifting towards the release of crucial inflation and retail data.

Following a sharp decline triggered by a disappointing US jobs report, equities rebounded in the subsequent days and ended Friday on a positive note. This recovery was bolstered by a report indicating fewer unemployment benefit claims than expected, alleviating fears that the world’s largest economy was shrinking.

Despite the recent calm, analysts caution that traders remain anxious and are closely watching upcoming indicators. The consumer price index (CPI) and retail sales reports this week could influence the Federal Reserve’s decision on interest rates.

Expectations suggest that the Fed may lower borrowing costs by 25 basis points next month and possibly once more before January, due to a series of data indicating that inflation is under control. However, there are differing opinions among Fed officials regarding the outlook for rates.

Governor Michelle Bowman remains cautious, fearing inflation could rebound if reductions are implemented prematurely. In contrast, Boston Fed chief Susan Collins believes that rate cuts could begin soon if data continues to show controlled prices.

Stephen Innes warned of potential market turmoil if there is a “double whammy” of higher CPI coupled with lower retail sales, which could trigger a swift retreat by investors, exacerbating concerns about stagflation.

On Friday, all three major US indexes closed positively. In early Asian trading, Hong Kong, Shanghai, Singapore, and Manila saw slight declines, while Sydney, Seoul, Taipei, and Wellington experienced gains. Tokyo was closed for a holiday.

The yen weakened after last week’s fluctuations, which saw it rise to a six-month high against the dollar following weak US jobs data that bolstered Fed rate cut expectations. The Bank of Japan had raised its rates for the second time in 17 years and indicated further hikes, which initially unsettled markets but was later tempered by reassuring comments.

Luca Santos from ACY Securities noted that while stability appears to be returning, it may be temporary. The broader market sentiment, influenced by expectations of significant rate cuts, suggests ongoing uncertainties.

The anticipated cumulative 100 basis points in rate cuts this year, followed by another 100 basis points in 2025, reflects a growing belief that the Federal Reserve may need to ease monetary policy more aggressively to support economic growth.

Key figures around 0200 GMT –

Hong Kong – Hang Seng Index: DOWN 0.1 percent at 17,065.68

Shanghai – Composite: DOWN 0.2 percent at 2,856.82

Tokyo – Nikkei 225: Closed for a holiday

Euro/dollar: UP at $1.0924 from $1.0921 on Friday

Pound/dollar: UP at $1.2780 from $1.2760

Dollar/yen: UP at 146.85 yen from 146.63 yen

Euro/pound: UP at 85.60 pence from 85.57 pence

West Texas Intermediate: UP 0.3 percent at $77.04 per barrel

Brent North Sea Crude: UP 0.1 percent at $79.74 per barrel

New York – Dow: UP 0.1 percent at 39,497.54 (close)

London – FTSE 100: UP 0.3 percent at 8,168.10 (close)