Stock markets in the Asian region staged a rally in the early hours of Monday based on hopes that a major US inflation reading coming up this week will show signs to ease. But the US Dollar was not so exciting due to the risk that might follow increased interest rates in Europe and any intervention from Japan.
All Green in Asia
There were holidays in South Korea and China which slowed down trading. Traders are also uncertain about what implication the advance of the Ukrainian military against the Russian army will be.
The wider index of MSCI monitoring Asia-Pacific stocks, apart from Japan, increased by 0.5% following its average recovery after being low to a two-year level. The Nikkei in Japan, on the other hand, went up by 1.1% following a 2% rally in the past week.
Blue chip companies in China did 1.3% higher while expecting reports on industrial activities and retail. The reports are due later this week and they are expected to reveal the improvements made in August following the disappointments faced in July.
Wall Street had a difficult time trying to prolong the recovery gained on Friday, but Nasdaq and the S&P 500 future ended flat. STOXX futures pushed higher by 0.6% while FTSE did 0.2%.
Bets on the CPI
Bullish traders are building their hopes on the consumer price reading coming up on Tuesday. They hope it will give a sign that inflation has hit its peak since pump prices are bringing down the top index by about 0.1%.
The core consumer price index might go by 0.3% according to forecasts, but few analysts say there is a possibility of calm in the report.
Westpac economists are of the opinion that the economy should see an average downward movement. They based their opinion on the fact that the economy shrank in the course of the first half of the year and households’ purchasing power was under huge pressure.
For those reasons, the Westpac economists predict that the core consumer price index will rise by 0.2% or more while the headline consumer price index could lose -0.2%. If that happens, they continued, the market and observers should not assume that the figures will be repeated in October and subsequent months as volatility might continue.
Soft figures from the CPI and Core CPI could bring back the speculations that the US Federal Reserve would increase the interest rates by just 50 basis points later this month. There is currently an 88% bet in the market that the Feds will increase rates by 75 basis points.