Asian markets generally saw gains this week as investors anticipate the release of crucial inflation data, set to influence the Federal Reserve's rate cut timeline. The spotlight is on the US Personal Consumption Expenditures (PCE) price index, the Federal Reserve's key inflation gauge, which is expected to impact policy decisions.
Recent hot inflation data has shifted expectations for US interest rate cuts to later in the year. Fed policymakers are cautious, waiting for additional time and data to confirm progress towards their two per cent inflation target. Analysts suggest that Thursday's PCE figures and other US economic indicators will significantly shape market sentiment.
As investors remain grounded ahead of critical economic data, including the Federal Reserve preferred inflation gauge, which is expected to shed some light on the timing of the first Fed cut.
Stephen Innes, managing partner of SPI Asset Management
Global Economy Awaits Key Economic Indicators
The largest global economy is set to unveil consumer and jobless figures alongside the world's most significant job market gauge, the initial jobless claims release. Stephen Innes highlights this data's considerable impact on investor perceptions and market volatility. Despite modest losses on both the Dow and S&P 500 indices on Wednesday, concerns over inflation led to challenges for stocks buoyed by AI euphoria in the final days of February.
Innes notes that the resurgence of inflation concerns has prompted investors to grapple with the potential for prolonged higher interest rates. Once favourable, the shifting dynamics in interest rates have transformed into subtly challenging headwinds, sparking cautious contemplation among investors.
According to New York Fed chief John Williams, the central bank still has a considerable journey ahead in its fight against inflation.
Eurozone inflation figures are eagerly awaited on Friday, while the cryptocurrency bitcoin surged above $63,000 on Thursday, nearing its peak from November 2021, fueled by emotional demand.
Bitcoin has found support in the US push towards establishing exchange-traded funds (ETFs) tracking its price, potentially broadening its investor base by enabling public participation without direct cryptocurrency purchases.
Asian Markets React to Global Trends
According to Matsui Securities, Tokyo stocks concluded on a lower note as the Japanese market sought direction following declines in US shares. Hong Kong experienced a decrease, whereas Shanghai recorded a 1.9 per cent gain, and the Shenzhen Composite Index on China's second exchange rose by 3.4 per cent.
Traders eagerly anticipate the National People's Congress meeting next week, hoping for increased economic support from Beijing. Shanghai experienced a rise, with positive trading observed in Seoul, Wellington, Mumbai, Jakarta, and Manila.
Conversely, Hong Kong, Sydney, Taipei, Singapore, Bangkok, and Kuala Lumpur reported declines.
G20 finance ministers and central bank heads convene in Brazil on Wednesday and Thursday to address challenges to the global economy, exacerbated by conflicts in Ukraine and Gaza, among other crises.
Investors Urged to Seize Bond Opportunities
Solita Marcelli from UBS Global Wealth Management advises investors to seize the current attractive bond yields, emphasizing a preference for the five-year duration segment due to its optimal blend of high yields, stability, and responsiveness to declining interest-rate expectations.
Amid anticipation of Thursday's inflation data and various central bank speakers, traders exercised caution in making substantial market moves. New Zealand policymakers are expected to maintain interest rates on Wednesday.
Shorter-term Treasury outperformed their longer counterparts, and US megacaps displayed mixed performance, with Apple Inc. gaining and Nvidia Corp. declining. Chevron Corp. and Hess Corp. faced losses following Exxon Mobil Corp.'s consideration of a move that could impact their merger and increase its stake in Guyana's significant offshore oil reserves. Bitcoin hovered around $57,000, while oil received support from pockets of strength in physical crude markets.