As investors await inflation data, Asian shares decline.
In anticipation of the release of U.S. inflation statistics that would have an influence on the forecast for interest rates throughout the world, investors noticed a dip in Asian markets on Monday while the dollar increased. Depending on the results of the data, the current increase in bond rates may be sped up or reversed.
Geopolitical Uncertainty Increases Market Skepticism
News that the U.S. Air Force had shot down a flying object near the Canadian border, making it the fourth such event this month, added to the market’s cautious tone. Following a 2.2% loss the previous week, the MSCI’s largest index of Asia-Pacific equities outside of Japan decreased by 0.7%. Australia and South Korea, two other significant markets, both experienced a drop. On the other hand, good statistics on bank lending led to a tiny 0.1% uptick in Chinese blue chips.
Retail Sales and Consumer Prices in the US to Predict Market Direction
The U.S. statistics on consumer prices and retail sales released this week may have a significant impact on the direction of the market. Forecasts call for a 0.4% increase in consumer prices overall, 0.4% in core prices, and 1.6% growth in sales. Bruce Kasman, head of economic analysis at JPMorgan, predicts that core CPI will climb by 0.5% and sales will grow by 2.2% as a result of the strength seen in the most recent January payrolls report.
Future Tightening by the Federal Reserve is in Focus
Since rates are now anticipated to peak at 5.15% and that rate reductions would occur later and more gradually, markets have already raised the possibility of more Federal Reserve tightening. After rising 21 basis points last week, 10-year Treasury rates are at five-week highs of 3.75%, while two-year yields are at 4.51%. This change has helped to stabilize the dollar, especially in comparison to the euro, which fell by 1.1% last week and continued to fall on Monday, reaching a five-week low of $1.0656.
Dollar Gains from Appointment of BOJ Governor
Following news that the Japanese government was reportedly considering appointing scholar Kazuo Ueda as the next governor of the Bank of Japan, the dollar also gained ground versus the yen on Friday. The BOJ’s loose monetary policies were rumored to be coming to an early conclusion as a result of this unexpected development, but Ueda subsequently said that the present course was suitable. After recovering from a low of 129.80 on Friday, the dollar was last up 0.3% at 131.76 yen.
Prices of oil and gold are under pressure.
The dollar’s strength and the rise in rates have placed pressure on gold prices, which have stayed stable around $1,860 per ounce as opposed to their top of $1,959 in early February. Oil prices, however, have come under further selling pressure after surging on Friday after Russia announced intentions to reduce daily output by 5% in March. WTI crude dropped 52 cents to $79.20 and Brent crude dropped 47 cents to $85.92 per barrel.