- Asian equities remained pressured while tracking Wall Street’s pattern.
- Fed policymakers’ resistance in welcoming easy inflation weigh on sentiment.
- Sino-American tussles, light calendar also act as extra trading filters.
- Japan’s Nikkei 225 appears the outlier while refreshing seven-month high.
Asia-Pacific shares remain mostly inactive, trending lower, outside Japan as traders seek fresh clues while tracking Wall Street’s moves during early Friday.
While portraying the mood, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.10% intraday and Australia’s ASX 200 0.80%. Japan’s Nikkei 225, however, appears to outshine the others while printing 2.80% daily gains by the press time.
The return of Japanese traders after Thursday’s national holidays appeared to have propelled the Nikkei 225 equity gauge, especially after the receding odds of the Fed’s aggression due to the easy inflation numbers.
However, the Fed policymakers continue to defend the hawkish moves. Among them, San Francisco Fed President Mary Day was the recent one who backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure. Previously, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evens stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.
It’s worth noting that the US Producer Price Index (PPI) for July tracked the headline Consumer Price Index (CPI) while easing to 9.8% YoY versus 11.3% prior and 10.4% market forecasts, the data published by the US Bureau of Labor Statistics revealed on Thursday. Details suggest that the monthly PPI dropped to the lowest levels since May 2020, to -0.5% compared to 1.0% expected and 0.2% prior, which in turn signaled more easing of inflation fears. Elsewhere, US Initial Jobless Claims eased to 262K for the week ending August 6 versus 263K expected and downwardly revised 248K prior.
Alternatively, US President Joe Biden’s pause in announcing tariff relaxations to China, actually the removal of the Trump-era tariffs, gained major attention and renewed the Sino-US tussles to weigh on the market sentiment in China. Additionally, a jump in the coronavirus cases from China also propels the risk-off mood. Furthermore, Taiwan’s criticism of the “One China” policy and US House Speaker Nancy Pelosi’s support for Taipei acts as an extra burden on the equities in China, Australia and New Zealand.
It should be noted that the increased odds of the 50 basis points (bps) rate hike by the Reserve Bank of New Zealand (RBNZ) exert additional downside pressure on New Zealand’s NZX 50, down 0.65% intraday by the press time.
Elsewhere, stocks in India, South Korea and Indonesia trade mixed while S&P 500 Futures also remain indecisive by the press time.
Moving on, traders should pay attention to the key data from the UK and India before preparing for the first impressions of the US Michigan Consumer Sentiment Index (CSI) for August, expected at 52.5 versus 51.5 prior.
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