Asia stocks wobble as focus turns to US inflation data, Fed outlook

Asian shares were down on Tuesday as financial markets fretted about persistent global cost pressures, with investors turning their focus this week to US inflation data and the prospects for further aggressive Federal Reserve rate hikes.

The unexpectedly strong US jobs data on Friday has raised the stakes for the July US consumer prices report due on Wednesday, especially for the Fed’s policy outlook.

“US stocks were struggling to hold on to gains, as the focus moves from a robust US labor market to the US CPI data out later this week,” ANZ analysts said in a note.

“The priority of reducing inflation to underpin the expansion in domestic demand and sustainable jobs growth will ring loud and clear from the August 25-27 Jackson Hole symposium.”

Early in the Asian trading day, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 per cent. The index is up 0.5 per cent so far this month. US stock futures rose 0.07 per cent.

Japan’s Nikkei slipped 0.81 per cent while Australian shares were flat.

China’s blue-chip CSI300 index was down 0.31 per cent in early trade. Hong Kong’s Hang Seng index opened 0.12 per cent lower.

On Monday, Wall Street closed mostly flat after blockbuster jobs data last week reinforced expectations the Federal Reserve will crack down on inflation, while a revenue warning from chipmaker Nvidia reminded investors of a slowing US economy.

Investors now await consumer price data on Wednesday to gauge whether the Fed might ease a bit in its inflation fight and provide a better footing for the economy to grow.

There were some encouraging signs for the Fed on the prices front, with a New York Fed survey on Monday showing consumers’ inflation expectations fell sharply in July.

The Dow Jones Industrial Average rose 0.09 per cent, while the S&P 500 lost 0.12 per cent and the Nasdaq Composite dropped 0.1 per cent.

Bonds also got a safe-haven bid due to unease over Beijing’s saber rattling against Taiwan amid days of Chinese military exercises around the island.

The yield on benchmark 10-year Treasury notes rose to 2.7517 per cent compared with its US close of 2.763 per cent on Monday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 3.2115 per cent compared with a US close of 3.216 per cent.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 106.37.

Oil prices continued their recent retreat after suffering the worst week since April on worries about stalling global demand as central banks keep tightening. O/R

US crude dipped 0.19 per cent to $90.59 a barrel. Brent crude fell to $96.48 per barrel.

The rise in the dollar was a setback for gold, although it had managed to bounce from the lows hit on Friday and was traded at $1788.7731 per ounce.

Published on

August 09, 2022

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