Investors in Asian markets are showing a mixed response as they await the release of the US Consumer Price Index (CPI) and quarterly results season. S&P500 futures are choppy in early trade, indicating anxiety among investors.
There are divided opinions among investors regarding the US result season, with some believing that the higher rates from the Federal Reserve (Fed) and the banking crisis have affected overall demand, while others believe that robust labor demand is a result of upbeat retail demand.
The US Dollar Index (DXY) is expected to test the immediate support of 102.00 as Fed policymakers have advised caution while considering May’s monetary policy. Chicago Fed President Austan Goolsbee has recommended a cautious approach, stating that the combination of tight credit conditions and further restrictive monetary policy can affect sectors and regions differently than if monetary policy was acting on its own.
At present, the Nikkei225 in Japan has jumped 0.61%, ChinaA50 has dropped 0.52%, Hang Seng has tumbled 0.74%, KOSPI has gained 0.21%, and Nifty50 has added 0.16%.
The Bank of Japan (BoJ) is required to infuse more stimulus into the economy to keep inflation steadily above the desired rate, which is why Japanese equities are showing resilience. Meanwhile, monthly Producers Price Index (PPI) numbers have shown a stagnant performance as expected by market participants.
While annual PPI has softened further to 7.2% from the prior release of 8.0%, it remains higher than the consensus of 7.1%, indicating that firms are unable to hike the prices of goods and services despite an increase in wage growth.
Chinese stocks continue to be in the spotlight despite investors losing confidence in the stellar economic recovery. The economy is in a disinflationary process due to weak retail demand, and China’s Consumer Price Index (CPI) is continuously declining despite monetary support from the administration after lifting Covid controls.
On the oil front, oil prices have soared to a near two-month high of around $81.75 as the street anticipates a quick softening of US inflation after commentary from Minneapolis Fed Bank President Neel Kashkari. Fed policymaker sees inflation at the middle 3% by the end of this year, closer to 2% next year.