Asian markets saw mostly positive movement on Monday as investors moved past last week’s volatility driven by US recession concerns. The attention has now turned to upcoming US inflation and retail data.
After a significant downturn triggered by disappointing US job creation figures, equities rebounded towards the end of the week, ending on a stronger note. This recovery was bolstered by a report showing fewer unemployment benefit claims than anticipated, easing fears of an economic contraction in the US.
In New York, all three major indexes finished Friday in positive territory. In Asian markets, gains were recorded in Hong Kong, Sydney, Seoul, Mumbai, Taipei, and Wellington, while Shanghai, Singapore, Jakarta, and Manila experienced slight declines.
The yen experienced fluctuations following its recent surge to a six-month high against the dollar, driven by weakened US jobs data and speculation about Federal Reserve rate cuts. This was coupled with the Bank of Japan’s recent rate hike and signals of further increases.
Despite this apparent stability, ACY Securities’ Luca Santos cautioned that the market’s calm might be short-lived, with underlying uncertainties still present. He noted that expectations of significant Federal Reserve rate cuts this year and next could indicate a need for more aggressive monetary policy to support economic growth.
Analysts are closely watching this week’s consumer price index and retail sales reports, which could influence the Federal Reserve’s decisions on interest rates. The general expectation is for a 25 basis point cut next month, with potentially more reductions before January, provided inflation remains under control.
However, differing views within the Fed regarding inflation and rate cuts add to market uncertainties. While some officials, like Governor Michelle Bowman, remain cautious about premature rate reductions, others, such as Boston Fed chief Susan Collins, are open to cuts if inflation data continues to show improvement.
Stephen Innes warned of potential market turbulence if higher inflation figures accompany lower retail sales, which could prompt a rush to sell off assets and exacerbate economic fears.
