Jamie McGeever, a financial markets columnist, gives a preview of the day’s trading in Asian markets.
Wednesday’s Asian markets will be on guard as investors prepare for U.S. inflation data later in the day that will play a significant role in the Fed’s rate decision next week. Sagging stocks and new 2023 year highs for oil will put investors on edge.
The latest tankan survey of manufacturing and service sector activity from Japan, Japanese business confidence, and corporate goods pricing all play significant roles in Asia’s economic calender. South Korean data on unemployment and import and export prices also play a role.
The announcement of the U.S. CPI for August will set off the real fireworks after Asian markets shut. While annual headline inflation is forecast to increase from 3.2% to 3.6%, annual core inflation is predicted to decline from 4.7% to 4.3%.
The Fed is in for a challenge with this. Markets, too.
Some of the euphoria that inflation was steadily sliding towards a 2% handle may turn out to be a little hasty given that the U.S. labour market is still tight by many metrics and wage growth is still slow.
The most recent oil price increase has increased worries about price pressures. Tuesday saw Brent crude rise about 2% to new annual highs above $92 a barrel, and it has gained nearly 30% since the end of 2014.
Investors and decision-makers could do without the first time this year that year-over-year oil prices are turning positive. Stocks on Wall Street ended Tuesday’s trading day down.
The unexpectedly hawkish signals from Bank of Japan Governor Kazuo Ueda over the weekend helped to unwind some of Monday’s knee-jerk swings in Japan’s stocks and exchange rate. Due to this, the yen declined once again to below 147.00 per dollar, and the Nikkei 225 index increased by about 1% on Tuesday.
The fact that the 10-year Japanese Government Bond yield made no attempt to reverse its upward trend on Monday and instead climbed marginally to a fresh 10-year high of 0.72% may be more instructive. The third-largest economy in the world is experiencing escalating financial costs.
The troubled Chinese real estate developer Country Garden had some good news when its creditors agreed to a three-year repayment extension on six onshore notes. But it already seems like the relief is wearing off.
Shares of the largest developer in the nation increased by as much as 10% in response to the news, but they only ended the day up 4%. Since the company’s market capitalization has been almost completely destroyed in recent years, intraday fluctuations like this are essentially useless.
According to Bank of America’s September fund manager survey, which also revealed that investor sentiment towards the global economy outside of China was improving, the real estate industry in China is the most potential source of a worldwide systemic credit catastrophe.
China’s economy will grow less than anticipated this year and next, according to a Reuters survey of experts, with risks still leaning to the negative.