China: Yet another unfavourable inflation report
Hong Kong stocks remain entrenched in a prolonged decline, hurt further by a significant drop in consumer prices in China, marking the steepest decrease in three years. This development has intensified worries about potential deflation impacting corporate earnings and profit margins, dragging down the region markets in a negative feedback loop.
In the interim, investors in the S&P 500 actively embrace the nuances of the Non-Farm Payrolls (NFP) report, even in the face of slightly higher-than-anticipated headline figures. Notably, the surge in productivity is currently counteracting over half of the inflationary effects resulting from increased labour costs. Despite a robust 4.0% year-on-year surge in hourly compensation, the rise in unit labour costs remains modest at just 1.6%, a notable contrast to the 6.5% observed when inflationary pressures began to emerge two years ago. If this trend persists, the Federal Reserve will face minimal challenges in achieving its 2% inflation target.
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
