Asian stock markets were mixed on Tuesday as investors lowered their expectations for the extent of rate cuts, with attention focused on key US inflation data that could play a pivotal role in the Federal Reserve’s interest rate decisions.
Consumer prices rose in January and February, the job market remains strong and the economy is in excellent health, with traders regularly tweaking their expectations for monetary policy easing this year. Some banks are considering not cutting interest rates until 2025.
Stocks soared in New York on Friday after traders focused on sluggish wage growth and the closely-watched nonfarm payrolls figure for March was much higher than expected.
But analysts have warned that if this week’s CPI report misses the upside, it could cause turmoil across the market.
“This release is probably the most important economic paper of the year,” said Stephen Innes of SPI Asset Management.
“Investors are eagerly awaiting this report in hopes of providing more insight into the Federal Reserve’s potential rate cut schedule and frequency.
“The big problem hiding in plain sight is that more and more segments of the investment community are even considering the prospect of no interest rate cuts this year, adding further uncertainty to the market outlook. .”
“The Fed has been hesitant to read too much into a string of months of better-than-expected inflation data, but it may change its mind in the third month,” said Chris Larkin of Morgan Stanley’s E*Trade. ” he added.
According to Bloomberg News, investors are currently expecting a rate cut of about 60 basis points this year, with only two cuts suggested and a less than 50% chance of three cuts. .
But Chicago Fed President Austan Goolsby warned that not loosening monetary policy could backfire.
“We have to be careful about how long we limit it,” he told Chicago radio station WBEZ.
“If we stay there too long, unemployment will start to rise,” he added.
The European Central Bank’s policy meeting on Thursday is expected to end without any changes, but an improving outlook for inflation is increasing expectations that the bank will start cutting interest rates soon.
Wall Street’s three major indexes ended the day flat and lukewarm, with Asian markets volatile throughout the morning.
Tokyo markets rose on the weaker yen, which is nearing the 152 yen level to the dollar that many believe could prompt intervention by Japanese authorities.
Hong Kong, Sydney, Singapore, and Taipei were also in positive territory, but Shanghai, Seoul, and Wellington were down.
The weekend also kicks off U.S. earnings season, with JPMorgan, Wells Fargo and Citigroup among the first to rise.
The results will be closely watched for the impact of high inflation and interest rates on corporate earnings, especially given the strong rally in stocks, which is partly based on confidence in future profits.
But JPMorgan Chief Executive Jamie Dimon warned that Wall Street markets were overvalued and said “sustained inflationary pressures could increase borrowing costs.”
– Main figures around 0230 GMT –
Tokyo – Nikkei Stock Average: up 0.5% to 39,540.76 (break)
Hong Kong Hang Seng Index: 16,905.96, up 1.0%
Shanghai – Overall: down 0.2% to 3,039.84
Dollar/JPY: down to 151.84 yen from Monday’s 151.85 yen
EUR/USD: fell from $1.0861 to $1.0858
GBP/USD: down from $1.2656 to $1.2654
EUR/GBP: down from 85.80p to 85.79p
West Texas Intermediate: up 0.4% to $86.75 per barrel
Brent crude: up 0.4% to $90.73 per barrel
New York – Dow: flat 38,892.80 (closing price)
London – FTSE 100: up 0.4% to 7,943.47 (close)
Dan/Sam
