The week started quietly for Asian stocks as Japan observed a holiday, reducing recent volatility. Investors awaited major U.S. and Chinese economic data to gain insights into global growth prospects. The Federal Reserve closely monitored U.S. consumer prices for signs of inflation and possible rate cuts.
U.S. consumer prices were expected to rise by 0.2% in both headline and core categories, with the annual core rate slowing slightly to 3.2%. Analysts predicted that these numbers could support the Fed’s confidence in ongoing disinflation and potentially lead to a rate cut in September. Additionally, a substantial 0.8% month-over-month increase in headline retail sales indicated strong consumer spending, fueled by solid income and wealth fundamentals.
As investors awaited the release of important economic indicators, the futures market suggested a 49% chance of a 50 basis points rate cut by the Fed in September. Several surveys on regional manufacturing and consumer sentiment were also anticipated to provide insights into overall market sentiment. Despite early trading showing a slight increase in Asian stocks, the overall market remained subdued.
China’s upcoming data on retail sales and industrial production were expected to underline the ongoing economic challenges, prompting discussions on potential stimulus measures. In currency markets, the dollar strengthened against the yen, while the euro remained stable. Analysts noted a shift in yen carry trades and projected further yen weakness in the long-term, with expectations of the dollar reaching 155.00 yen by year-end.
Commodity markets witnessed steady gold prices and a slight increase in oil prices following concerns of a Middle East conflict impacting supplies. Reports of Iran’s military preparations for a potential attack on Israel added to geopolitical tensions, contributing to fluctuations in oil prices. Brent crude gained 5 cents to $79.71 a barrel, while U.S. crude rose by 13 cents to $76.97 per barrel.
As global economic data continued to shape investor sentiment, Asian stocks navigated through a period of uncertainty. Key indicators from the U.S. and China played a crucial role in determining market movements, while geopolitical tensions added an additional layer of complexity. The coming days would offer more clarity on the economic outlook, guiding investment decisions and market trends.