Finance

Asian stocks tread water ahead of inflation data: markets close

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1 month ago

May 28, 2024

Asian stocks tread water ahead of inflation data: markets close

(Bloomberg) — Asian shares traded within a narrow range on Tuesday and the dollar slipped ahead of a series of inflationary pressures expected to influence the direction of global monetary policy.

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Stocks in South Korea and Taiwan rose. The US and UK markets were closed on Monday and European shares edged higher in thin trading. Futures on the S&P 500 moved higher in the early hours in Asia.

In the commodities sector, gold held steady as traders awaited US inflation data. Oil advanced as focus shifted to an OPEC+ supply meeting on Sunday and US demand at the start of the summer season.

Traders will study new inflation data this week from Australia to Japan, the euro region and the US. Bank of Japan Governor Kazuo Ueda and his deputy indicated there is room for a gradual increase in interest rates now that the country has moved away from a 0% inflation target. Japanese producer prices in April exceeded expectations.

The dollar fell against all comparable countries in the Group of 10 and yields on ten-year government bonds fell.

The Federal Reserve’s favorite measure of underlying inflation is expected to show modest relief on Friday. Chairman Jerome Powell has emphasized the need for more evidence that inflation is moving toward the 2% target before easing policy. John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among the US central bankers scheduled to speak this week.

Chinese property shares traded higher after financial center Shanghai cut down payment ratios and the minimum mortgage threshold, while bigger Chinese cities continued central government support for the property sector.

With US and UK markets closed on Monday, European shares were in the spotlight, with carmakers and utilities posting modest gains in the Stoxx Europe 600 index. Sales were less than half of the twenty-day average for that time.

The ECB should not rule out cutting borrowing costs at both its June and July meetings, Governing Council member François Villeroy de Galhau said, pushing back against fellow monetary officials who were uneasy at the idea of successive cuts. Chief economist Philip Lane told the Financial Times that the central bank will have to keep its policy restrictive through 2024, even with the prospect of a rate cut next month.

Although an ECB rate cut was widely reported in June, subsequent steps are less clear given uncertainty about wage growth and factors such as the fighting in the Middle East. Data this week could show that headline inflation in the euro region rose in May.

Read more: On the ‘T+1’ rule that makes US stocks settle down in a day: QuickTake

The “T+1” rule, which could potentially cause problems for foreign investors, will come into effect when traders return from the long weekend – causing US stocks to settle in one day instead of two.

Some important events this week:

The IMF is holding talks with Ukrainian authorities to review economic policies as the country tries to release the next tranche of $2.2 billion in aid, Monday
Cleveland Fed President Loretta Mester speaks at BOJ event in Tokyo; Minneapolis Fed President Neel Kashkari and ECB Governing Council member Klaas Knot address the Barclays-CEPR International Monetary Policy forum on Tuesday
South African elections on Wednesday, the most important since the end of apartheid
Fed releases the Beige Book economic survey on Wednesday
South Africa rate decision, US initial unemployment claims, GDP, wholesale stocks, Thursday
New York Fed President John Williams speaks at the Economic Club of New York on Thursday
GDP data released for Canada, Eurozone and Turkey, Friday
Unemployment in Japan, CPI in Tokyo, industrial production, retail sales, Friday