8-8-2023 (SYDNEY) Asian share markets experienced a mostly weaker trend, while the US dollar strengthened on Tuesday as investors anticipated inflation readings from China and the United States. These readings are expected to provide an updated outlook on the global economy’s health.
MSCI’s broadest index of Asia-Pacific shares outside Japan showed a 0.9% increase on Tuesday, following the mild gains seen in US stocks during the previous session. However, the index has recorded a decline of 2.8% so far this month.
The yield on benchmark 10-year Treasury notes rose to 4.0885% compared to its US close of 4.078% on Monday. The two-year yield, which reflects traders’ expectations of higher Federal Reserve fund rates, touched 4.7682% as opposed to the US close of 4.758%.
Australian shares saw a 0.39% increase, while Japan’s Nikkei stock index rose by 0.72%. On the other hand, Hong Kong’s Hang Seng Index fell by 1.73%, and China’s blue-chip CSI300 Index experienced a loss of 0.54% in early trade.
The mixed start in Asian markets follows a stronger performance in US markets. The Dow Jones Industrial Average recorded a 1.16% rise, the S&P 500 gained 0.90%, and the Nasdaq Composite added 0.61%.
Global investors are eagerly awaiting inflation data from China on Wednesday and the US on Thursday, expecting significant differences in price movements between the world’s two largest economies.
According to a Reuters poll of economists, US inflation likely slightly accelerated in July to an annual rate of 3.3%, while the core rate is expected to remain unchanged at 4.8%. ANZ predicts that China’s consumer price index for July will show a year-on-year decrease of 0.4%.
“The Fed is wary of upside risks to elevated inflation given demand for labor remains excessive, and most policymakers think the policy rate will need to be kept restrictive,” ANZ economists stated on Tuesday. They added, “Weak inflation in China should be a global disinflationary force in goods markets going forward.”
Chinese trade data for July, to be published later on Tuesday, is expected to reveal a 12.5% decrease in exports compared to the previous year, based on the median forecast of 28 economists in a Reuters poll.
Investors are still considering the possibility of economic stimulus from China’s central government to revive its stagnant economy. While minor measures have been implemented to support property markets in the past two weeks, no broad stimulus plan has been outlined.
“While awaiting ominous signs of deflation, markets are torn between economic gloom and hopes of resounding stimulus that is set to re-ignite China’s growth,” noted Mizuho economists. They added, “We are, however, unconvinced that Beijing’s stimulus efforts will achieve the intended ‘lift-off’ for the still struggling economy.”
The dollar remained flat against the yen at 142.47, still a considerable distance from its high of 145.07 reached on June 30. The European single currency declined by 0.1% against the dollar to $1.1002, while the dollar index, which tracks the greenback against a basket of major currencies, rose to 102.07.
US crude oil prices increased by 0.51% to reach $82.36 per barrel, while Brent crude rose to $85.73 per barrel.
Gold experienced a slight decline, with the spot price at $1,935.55 per ounce.
