SYDNEY: Asian stocks turned caution on Monday as US stock futures posted early gains, though investors were wary of bearish surprises later in a batch of Chinese economic data.
Annual growth in retail sales, industrial production and urban investment is expected to slow further in October, partly due to pandemic restrictions and stress in the housing market.
CBA economists argued there was a chance the People’s Bank of China would cut bank reserve requirements (RRR) this week to support activity.
“We estimate that a 50 basis point reduction in RRR could lead to a liquidity release of CNY 1 billion,” he said in a note.
Elsewhere, the UN climate conference in Scotland did manage to nail down a deal on emissions, but only by undermining the commitment to phase out coal.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1% after hitting higher levels late last week.
Japan’s Nikkei rose 0.7%, as data showed a more-than-expected shrinking economic activity in the third quarter only strengthened the case for an aggressive fiscal stimulus.
Wall Street eased to break a string of gains last week, though major indices were only a shadow from all-time highs. S&P 500 futures gained 0.2% in early trade on Monday, while Nasdaq futures rose 0.3%.
A major release this week will be US retail sales on Tuesday for any impact from a fall in consumer sentiment for November to a decade low, as people worried about higher prices, especially for petrol.
There are also doubts about whether firms have the pricing power to maintain margins in the face of rising costs.
Analysts at BofA noted that 75% of US companies had outpaced earnings estimates in the latest reporting season, but forecasts for the fourth quarter were only flat, breaking expectations for more than a year.
The grim survey helped hold Treasuries slightly stable, but yields were still up 11 basis points for the week as markets were at greater risk of a quick tightening by the Federal Reserve.
BofA economist Ethan Harris suspects that the market is still not priced high enough because higher initial levels of inflation mean further increases in rates are needed to reach neutral.
Harris warned, “If inflation remains high and comes above the planned overshoot, the Fed will need to become more rigid and either accept a market correction or intentionally induce such a correction. “
Higher US yields combined with general risk aversion to leverage the dollar, which has claimed its best week in nearly three months. Against a basket of currencies, the dollar was stable at 95.120 and was at its highest level since July 2020.
It was holding at 113.99 yen, preparing for another challenge to the October top at 114.69.
The euro looked weak at $1.1442, having declined decisively last week.
“The Covid infection curve is heading in the wrong direction, while Austria and the Netherlands are being re-imposed,” said Ray Attrill, head of FX strategy at NAB.
“Both the implications or growth on money markets and ECB policy are not being lost.”
European Central Bank President Christine Lagarde will appear before the European Parliament later on Monday.
Inflation concerns kept gold demand at $1,865 an ounce, after the biggest weekly gain since May.[GOL/]
Oil prices had a rough week, fueled by a strong dollar and speculation that President Joe Biden’s administration may release oil from the US Strategic Petroleum Reserve.[O/R]
Early Monday, Brent jumped 21 cents to $82.38 a barrel, while US crude was up 28 cents to $81.07.
Disclaimer: This post has been self-published from the agency feed without modification and has not been reviewed by an editor
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