Asian Stock Market: Demonstrate caution ahead of US Inflation, oil eyes auction above $78.00
- Asian stocks are displaying anxiety as investors await US inflation for fresh impetus.
- Weaker-than-projected China’s PPI data may impact equities on expectations of lower operating margins.
- Oil prices are looking to extend gains above $78.00 on expectations of recovery in China’s growth.
Markets in the Asian domain have turned cautious as investors are awaiting the release of the United States inflation data for fresh cues. This has turned the potential assets sideways as investors are avoiding getting caught in volatile moves before the release. The US Dollar Index (DXY) is facing barricades around 102.80 while S&P500 futures are displaying a subdued performance after two back-to-back bullish trading sessions.
At the press time, Japan’s Nikkei225 trades almost flat, ChinaA50 drops 0.17%, Hang Seng eased 0.12%, and Nifty50 slips 0.20%.
Chinese stocks have also been impacted after the release of the mixed Consumer Price Index (CPI) data. The annual CPI figure has remained in line with the expectations at 1.8% and higher than the former release of 1.6%. While, the price index at the factory gate has dropped sharply, signaling less bargaining power from producers. The Producer Price Index (PPI) has shrunk by 0.7% vs. the expectation of 0.1% contraction. A decline in PPI numbers I expected to impact Chinese equities ahead as lower prices are likely to impact their operating margins.
Meanwhile, Japanese markets are likely to display wild gyrations as the Bank of Japan (BoJ) will review the side-effects of secular period ultra-loose monetary policy managed by the central bank. Japanese officials are considering shifting the paradigm of their monetary policy approach as an exit to easy monetary policy may provide support to the Japanese yen for a longer period.
On the oil front, oil prices are aiming to accelerate gains further above $78.00 amid optimism over a recovery in China’s economic growth led by the reopening of the economy and heavy bets on further softening of the US inflation.