After central banks last week reiterated the idea that interest rates will remain higher for longer, Asian shares were cautious on Monday as investors prepared for U.S. and European inflation data.
The markets will also be watching for more indicators of whether China’s economy is picking up steam.
The Bank of Japan did not alter its dovish monetary policy, and the yen continued to decline to levels below nine-month lows at 148.38 per dollar. Japanese ten-year bond yields ended the day at 0.745%, a decade high.
After falling 2.3% the previous week to new ten-month lows, MSCI’s broadest index of Asia-Pacific shares outside of Japan declined 0.1% on Monday. The index reversed previous losses on Friday thanks to a rally in Chinese stocks.
The Nikkei in Japan gained 0.2%. Nasdaq futures and S&P 500 futures both increased by 0.1%.
In anticipation of improved growth in the world’s second-largest economy, Chinese equities rose 1.8% on Friday. The industrial profit numbers on Wednesday and the manufacturing and services PMIs on Saturday will serve as the week’s major litmus tests.
China’s upcoming week-long holiday, which begins on Friday, will also be a crucial indicator of whether or not consumer confidence and spending are beginning to rebound.
The U.S. Federal Reserve’s more pessimistic rate expectations from last week, which took the markets off guard, were still stinging bond investors. Markets increased wagers that interest rates would remain higher for longer and substantially reduced forecasts of rate cuts due to recent economic strength in the US economy.
The U.S. data will be crucial. U.S. business activity effectively came to a halt in September, with the large services sector idling at the weakest rate since February, which is a symptom of declining development.
This week’s inflation readings for the US and Europe are expected to be positive, according to JPMorgan’s senior economist Bruce Kasman.
“First, August real PCE expenditure in the US is predicted to flatten, indicating that the mid-year surge is coming to an end, and overall growth is anticipated to decrease until the end of the year. In a client letter, he added that both the US and the Euro area “should deliver low core inflation readings.”
The core Personal Consumption Expenditures Price Index, the Fed’s preferred inflation indicator, is anticipated to show a 0.2% monthly increase for August on Thursday, unchanged from July. Weekly unemployment claims and the final Q2 GDP are two additional U.S. data points this week.
The U.S. dollar was still holding firm in the currency markets, trading at 105.58 against a basket of key currencies, close to its six-month high.
Ten-year Treasury rates decreased from a 16-year high of 4.508% on Friday and were little changed at 4.4519%. The two-year yield fell from a 17-year high of 5.2020% reached last week to close at 5.1140%.
On Monday, oil prices increased and were not far from their 10-month highs. U.S. West Texas Intermediate crude futures were up 0.5% at $90.47 and Brent crude futures were up 0.5% to $93.73 a barrel.
The price of an ounce of gold stayed unchanged at $1,923.88.
Ten-year Treasury rates decreased from a 16-year high of 4.508% on Friday and were little changed at 4.4519%. The two-year yield fell from a 17-year high of 5.2020% reached last week to close at 5.1140%.
On Monday, oil prices increased and were not far from their 10-month highs. U.S. West Texas Intermediate crude futures were up 0.5% at $90.47 and Brent crude futures were up 0.5% to $93.73 a barrel.
The price of an ounce of gold stayed unchanged at $1,923.88.
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