|Asian markets mixed as rally fizzles, oil hit by Suez ship news, illustration photo|
A below forecast reading on US prices on Friday provided support as it eased fears that inflation caused by an expected strong global rebound will force central banks to wind back their ultra-loose monetary policies or hike interest rates.
The week ahead will provide plenty for traders to get their teeth into including the release of key US jobs data for March and figures on manufacturing activity around the world.
President Joe Biden is also tipped to soon unveil the next leg of his economic recovery plan targeting infrastructure, which some suggest could come in around $3 trillion. That comes just as his recently passed $1.9 trillion stimulus begins to kick in.
Still, that is causing some concern as the bill for this will likely be paid for by higher taxes, while there is also a worry that it will add to upward pressure on prices. US Treasury bond yields — a guide to future interest rates — are already sitting around one-year highs.
Still, John Bilton, at JP Morgan Asset Management, said: “Inflation remains a persistent concern for investors. We expect headline inflation to be volatile in the second and third quarters, with the potential for some sticker shock as annualised base effects generate optically elevated year-on-year readings.
“However, we believe that many of the secular disinflationary forces — globalisation, technology adoption, etcetera — continue to anchor core inflation so that even allowing for huge policy stimulus, inflation rates should remain contained in 2021.”
– ‘Double-edged sword’ –
Wall Street’s three main indexes finished Friday on a strong note, with the Dow and S&P 500 ending at all-time highs.
In Asia, Tokyo, Shanghai, Singapore, Taipei, Manila, Bangkok and Wellington all rose but Hong Kong, Seoul and Jakarta reversed morning gains to sit lower. Sydney was also weighed by news that Brisbane had been put into a three-day lockdown.
London was barely moved in the first few minutes, while Paris and Frankfurt edged up.
Optimism was also being supported by the success of vaccine rollouts in the United States and Britain, where infection rates are also slowing and officials move to ease some lockdown measures.
Even European markets were buoyant, despite the continent’s stuttering inoculation drive and rising infections, thanks to some forecast-beating economic data.
But Axi strategist Stephen Innes said this week’s data releases would be crucial to driving further gains.
“Given there is so much optimism in the economic reopening narrative baked into the price, it’s hugely important this week’s financial data, at minimum, meets expectations to maintain this ship on an even keel,” he said in a note.
“But this could be a double-edged sword for pockets of the market as the combination of stimulus and robust data support equity prices. However, tech faces some challenges if the ‘risk-on’ signal manifests into higher real yields.”
Both main oil contracts tumbled more than two percent after salvage teams were said to have had success in partially moving a megaship which has blocked the Suez Canal for almost a week.
Maritime services provider Inchcape’s tweet that the Ever Given had been refloated in the early morning means one of the most important routes for global trade and crude shipments can reopen. However, owners of the vessel told AFP it “has turned” but had yet to be refloated.
Still, Suez Canal Authority chief Osama Rabie said the process of refloating the ship had begun, “with success”.
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: UP 0.7 percent at 29,384.52 (close)
Hong Kong – Hang Seng: DOWN 0.2 percent at 28,287.79
Shanghai – Composite: UP 0.5 percent at 3,435.30 (close)
London – FTSE 100: FLAT at 6,740.46
Euro/dollar: DOWN at $1.1782 from $1.1794 at 2100 GMT on Friday
Pound/dollar: DOWN at $1.3770 from $1.3792
Euro/pound: UP at 85.56 pence from 85.49 pence
Dollar/yen: DOWN at 109.56 yen from 109.63 yen
West Texas Intermediate: DOWN 2.4 percent at $59.52 per barrel
Brent North Sea crude: DOWN 2.1 percent at $63.20 per barrel
New York – Dow: UP 1.4 percent at 33,072.88 (close)