- The risk-off mood ahead of US inflation is keeping Asian indices on the tenterhooks.
- Softer-than-anticipated China inflation numbers have impacted Chinese equities heavily.
- Japanese investors are highly focused for the novel leadership of the BoJ for further cues.
Markets in the Asian domain are demonstrating weakness considering the risk-off market mood propelled ahead of the United States Consumer Price Index (CPI) data, scheduled for Tuesday. S&P500 futures are facing immense pressure as investors are worried that more interest rate hikes by Federal Reserve (Fed) chair Jerome Powell in his battle against stubborn inflation. The 500-US stocks basket futures have reported a sell-off in the past two trading sessions and more losses are in pipeline considered the current move.
At the press time, Japan’s Nikkei225 added 0.25%, ChinaA50 dropped 0.63%, Hang Seng plunged 1.80%, and Nifty50 surrendered 0.36%.
The expression of deflation from China’s Consumer Price Index (CPI) (Jan) report has impacted equities dramatically. The annual inflation data has landed at 2.1%, between the consensus of 2.2% and the prior release of 1.8%. The monthly inflation figure has shown a deflation of 0.8% against an expansion in the inflationary pressures by 0.7%.
Meanwhile, China’s Producer Price Index (PPI) has shown a deflation of 0.8% higher than the projections of 0.5% and the former release of 0.7%. It indicates that producers are heavily cutting prices of goods and services at factory gates due to weak demand by the households.
This might compel the People’s Bank of China (PBoC) and the Chinese authorities to fuel helicopter money to support the economy, which is still recovering from the rollback of pandemic curbs.
Japanese stocks are mildly positive as investors are gearing up for novel Bank of Japan (BoJ) leadership after a long period of service by current Governor Haruhiko Kuroda. Japan’s government might reveal the new nomination for BoJ Governor on Feb 14.
The oil price is juggling above the critical support of $77.50 after a softer China inflation data. An absence in consumer spending recovery despite the lifting of the pandemic controls is indicating that investors need to wait more than anticipated as the economy will take sufficient time in achieving pre-pandemic growth levels.
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Asian stock markets opened the trading session in the red on Tuesday, as the Chinese Shanghai Index nosedived just seconds after the release of economic data that missed market expectations.
Inflation in China, a key economic indicator, rose 2.5% year-on-year in March, according to the National Bureau of Statistics of China. While this is the highest level of inflation since September last year, it is still lower than the market estimate of 2.6%. This miss is enough to spark jitters across the region’s equity markets.
The Shanghai Index was down 0.54%, to 3283.55 at the end of the trading session, making it the worst performer among its Asian peers. Other benchmarks, including the Hong Kong’s Hang Seng, Japan’s Nikkei 225 and South Korea’s Kospi, fell 0.1%, 0.3% and 0.09%, respectively.
Investors sent riskier assets such as stocks retreating during today’s session as the rising inflation failed to convince markets of the Chinese economy’s good health. Writing in the Financial Times, Orsolde Palmer, a macro-economic strategist at Goldman Sachs, cautioned that there might be a period of “tightening financial conditions” as the Chinese market adjusts to the volatile economic data.
The day’s trading was further complicated by the resurgence of oil prices. Crude oil prices jumped yesterday after the US Energy Information Administration released data that showed that America’s inventories had fallen. Meanwhile, Brent, the global marker, rose just 0.45% today, enough to suggest that the market was consolidating the previous day’s gains.
Asian investors are expected to focus on more economic data releases this week, with investors paying particular attention to the leading indicators from the Chinese markets. In the meantime, the Asian risk-off sentiment is likely to remain as investors juggle this dangerous cocktail of uncertainty.