As the new week began, Asian stocks experienced a relatively quiet start due to a holiday in Japan. This absence of one market source of volatility provided a temporary sense of calm to investors. However, the focus quickly shifted towards the upcoming release of major economic data from the U.S. and China, which is expected to offer insight into the global growth prospects.
One of the key factors that the Federal Reserve will be closely monitoring is the U.S. consumer prices report scheduled for Wednesday. Economists are anticipating a modest increase of 0.2% in both the headline and core prices, with the annual core rate slowing slightly to 3.2%. This data is crucial in determining the Fed’s decision on a potential rate cut in September.
Barclays analysts pointed out that while a positive consumer price index could strengthen the case for a rate cut, a core rate above the target might deter a more aggressive monetary policy action. Additionally, there are expectations for a strong monthly increase in headline retail sales, indicating the resilience of the consumer sector driven by solid income and wealth foundations.
Apart from the consumer prices report, there are other significant data releases such as industrial output, housing starts, and various surveys on manufacturing and consumer sentiment. These reports are crucial in gauging the overall health of the U.S. economy and its impact on market sentiment.
On the global front, investors are closely watching the Asian markets, with the MSCI’s broadest index of Asia-Pacific shares outside Japan showing a slight uptick. In the U.S., the release of earnings reports from companies like Walmart and Home Depot will provide insights into consumer behavior and economic outlook.
In the currency markets, the dollar saw a marginal increase against the yen and remained steady against the euro. Analysts suggest that the recent unwinding of yen carry trades has reached its peak, leading to a potential weakening of the yen in the long term. Meanwhile, gold prices remained stable, while oil prices showed a slight uptrend amid geopolitical tensions in the Middle East.
Recent statements from Israeli Defense Minister Yoav Gallant regarding Iran’s military preparations have added to the uncertainty in the oil market. The potential for a large-scale attack on Israel has raised concerns about the stability of the region, impacting oil prices and market sentiment.
The global market is bracing for significant economic data releases that will likely drive stock movements and investor sentiment in the coming days. As market participants analyze the incoming reports, the focus remains on key indicators such as consumer prices, retail sales, and industrial production to gauge the trajectory of the global economy.