Asian share markets were generally lower while the U.S. dollar rose on Tuesday as investors awaited inflation data from China and the United States to provide an updated assessment of the state of the global economy. After U.S. stocks concluded the previous session with modest gains, MSCI's largest index of shares outside of Japan that …
Asian share markets were generally lower while the U.S. dollar rose on Tuesday as investors awaited inflation data from China and the United States to provide an updated assessment of the state of the global economy. After U.S. stocks concluded the previous session with modest gains, MSCI’s largest index of shares outside of Japan that are from Asia-Pacific increased by 0.9% on Tuesday. In this month alone, the index has fallen 2.8%. From its U.S. finish on Monday of 4.078%, the yield on the benchmark 10-year Treasury note increased to 4.0885%. The two-year yield reached 4.7682% compared to a U.S. finish of 4.758%, rising in line with traders’ forecasts of increased Federal Reserve fund rates. While Japanese market index Nikkei jumped 0.72%, Australian shares increased by 0.39%. While China’s blue chip CSI300 Index lost 0.54% in early trade, Hong Kong’s Hang Seng Index fell by 1.73%. Following a stronger night in U.S. markets, Asia is off to a mixed start. The S&P 500 increased by 0.90%, the Nasdaq Composite increased by 0.61%, and the Dow Jones Industrial Average increased by 1.16% on Wall Street. Global markets are eagerly anticipating the inflation readings from China on Wednesday and the U.S. on Thursday, expecting them to reveal significant disparities in price movement between the two largest economies in the world. A Reuters poll of experts found that while the core rate was likely stable at 4.8% in July, U.S. inflation likely increased slightly to an annual 3.3%. China’s consumer price index for July is expected to register a year-over-year decline of 0.4%, according to ANZ. Given the continued excess demand for labour, “the Fed is wary of upside risks to elevated inflation,” according to ANZ economists on Tuesday. “Most policy makers think the policy rate will need to be kept restrictive.” Future deflationary pressure on the world’s goods markets should come from China’s low inflation rate. China’s July export figures, which are due for release later on Tuesday, would likely show a 12.5% decline from a year earlier, according to the median forecast of 28 economists in a Reuters poll. Investors are still debating the possibility of China’s central government implementing economic stimulus measures to resuscitate a stagnant economy. The previous two weeks have seen the delivery of some minor initiatives to support the real estate markets, but no comprehensive stimulus plan has been announced. “Markets are torn between economic doom and hopes of resounding stimulus that is set to re-ignite China’s growth. While anticipating ominous signs of deflation, we are also sceptical that Beijing’s stimulus efforts would provide the still-struggling economy the anticipated “lift-off,” Mizuho economists said. The dollar/yen exchange rate was unchanged at 142.47. From its peak of 145.07 on June 30 of this year, it has yet to come close. The dollar index, which measures the value of the dollar relative to a basket of major trading partners’ currencies, increased to 102.07 while the euro fell by 0.1% on the day to $1.1002.
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