Hong Kong rose over 1%, while Sydney, Taipei and Wellington were also in the green, though Shanghai edged down
Equities mostly gained in Asia on Wednesday following a tepid day on Wall Street, with investors focussing on the release of key US inflation data that could have a big impact on the outlook for interest rates.
While markets responded positively to last week’s strong jobs report, which pointed to a still-strong economy, there is a nervousness on trading floors that a third consecutive miss to the upside on consumer prices could force the Fed to delay cutting borrowing costs.
The CPI “is the critical number this week”, according to NatAlliance Securities’ Andrew Brenner. The worry is that CPI has continued to be a thorn in the side of the Federal Reserve. He added that “positioning is strongly bearish”.
Investor expectations on rate reductions this year have been cut from six at the beginning of the year to three at most, with some even expecting zero, though some proposed that no rate reductions could be the price to pay for economic health and strong earnings.
Atlanta Fed boss Raphael Bostic sounded a pragmatic note on Tuesday when asked about the bank’s plans.
He repeated his view that it would make one cut this year but said he was open to changing his mind as the data came in.
Still, Krishna Guha at Evercore remained upbeat ahead of the CPI reading, adding that “the odds are the data will come in good enough to go ahead”.
In early Asian trade, Hong Kong rose over 1%, while Sydney, Taipei and Wellington were also in the green, though Shanghai edged down.
Tokyo was also lower as a stronger yen weighed on exporters. The currency rose against the dollar after less-than-dovish comments from Bank of Japan boss Kazuo Ueda.
