Asian equities predominantly advanced on Tuesday as investors turned their attention to pivotal US inflation data, which could influence the Federal Reserve’s interest rate decisions.
Market participants have tempered expectations for rate cuts, considering the uptick in consumer prices and robust job market conditions.
Following stronger-than-expected March non-farm payroll figures, stock markets in New York surged, with focus shifting to wage growth trends. However, analysts caution that an upside surprise in the upcoming consumer price index report could unsettle markets.
Stephen Innes of SPI Asset Management emphasized the significance of the impending economic data, suggesting it could shed light on the Fed’s rate cut timeline. Chris Larkin from E*Trade at Morgan Stanley noted that prolonged higher-than-expected inflation could prompt a shift in the Fed’s stance. Meanwhile, investors anticipate about 60 basis points of rate cuts this year, signaling just two reductions, according to Bloomberg News.
In Europe, the European Central Bank’s policy meeting is expected to conclude with no change, although growing expectations of future rate cuts have surfaced amid an improving inflation outlook. While Wall Street indices closed flat, Asian markets generally trended upwards, with Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Mumbai, Bangkok, and Taipei registering gains. However, Seoul and Wellington experienced slight declines.
The upcoming US earnings season, beginning with reports from JPMorgan, Wells Fargo, and Citigroup, will be closely monitored for insights into the impact of inflation and interest rates on corporate performance. JPMorgan chief Jamie Dimon cautioned that Wall Street markets appear overvalued, citing persistent inflationary pressures that could lead to higher borrowing costs.
Key Figures (as of 0810 GMT):
– Tokyo – Nikkei 225: Up 1.1% at 39,773.13 (close)
– Hong Kong – Hang Seng Index: Up 0.6% at 16,828.07 (close)
– Shanghai – Composite: Up 0.1% at 3,048.54 (close)
– London – FTSE 100: Up 0.1% at 7,948.93
– Dollar/yen: Up at 151.90 yen from 151.85 yen on Monday
– Euro/dollar: Down at $1.0852 from $1.0861
– Pound/dollar: Down at $1.2652 from $1.2656
– Euro/pound: Down at 85.77 pence from 85.80 pence
– West Texas Intermediate: Up 0.5% at $86.83 per barrel
– Brent North Sea Crude: Up 0.4% at $90.77 per barrel
– New York – Dow: Flat at 38,892.80 (close)
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