Moving markets today: Asian shares mirror Wall Street decline, yen dips below ¥153/$, Chinese inflation edges up, US Fed rate cut bets trimmed; All eyes on ECB policy decision, US producer prices data
US stocks and Treasuries experienced a decline as higher-than-expected inflation in March dashed hopes for immediate interest rate cuts. This setback in the US market influenced Asian shares, which also fell due to concerns about global interest rates. The US dollar strengthened significantly, reaching a 34-year high against the yen following the release of US inflation data, breaking through the ¥153 mark for the first time since the mid-1990s. In response to the inflationary figures, expectations for Federal Reserve rate cuts were reduced in the markets. Meanwhile, Chinese consumer prices saw a modest rise in March amidst subdued demand. Investors are now eagerly awaiting the release of US producer price data and the European Central Bank policy meeting later in the day, along with the unofficial commencement of the first-quarter earnings season. Major banks like JPMorgan Chase & Co, Citigroup, and Wells Fargo & Co are slated to reveal their financial results on Friday, attracting significant attention from investors. Here are five key takeaways for your day.
Chinese consumer prices edge up in March amid sluggish demand
In March, China experienced a slight uptick in consumer prices, which was below what analysts had predicted. This highlights the ongoing struggle for the country’s second-largest economy to stimulate domestic demand effectively.
Official data released on Thursday revealed that consumer prices rose by 0.1 per cent compared to the previous year, a drop from the 0.7 per cent seen in February and lower than the economists’ forecast of 0.4 per cent.
The troubling deflationary pressures in the world’s second-largest economy seem to be easing slowly, but demand remains weak, and a prolonged property crisis continues to weigh heavily on both consumer and business confidence.
UK housing market recovery accelerates: RICS survey
Britain’s housing market saw a surge in buyer interest, reaching its highest level in over two years, while house prices climbed to their peak since 2022, according to a survey by the Royal Institution of Chartered Surveyors (RICS).
The positive trend is attributed to factors such as easing inflation and declining mortgage rates, contributing to stabilizing the market after experiencing reduced demand due to rising costs throughout 2022 and parts of 2023.
The RICS survey showed buyer enquiries increased significantly in March, with a net balance of +8, the strongest since February 2022. Despite a preference for price declines over increases, the measure of house prices improved to -4, the highest since October 2022, surpassing economists’ expectations, Reuters reported.
Traders dial back Fed rate cut expectations after hot US inflation
Traders scaled back their expectations for Federal Reserve interest rate cuts on Wednesday due to higher-than-expected US inflation.
Now, it’s believed that rate cuts may not happen until after the November 5th vote, according to market forecasts. Futures traders adjusted their predictions, now anticipating one to two quarter-point cuts for the year, a significant decrease from initial expectations of at least six cuts in January, the FT reported.
Previously, there was strong confidence in a rate cut in July, but after Wednesday’s report, that confidence dropped by half, from about 98 per cent to 50 per cent. Although markets still see a high chance of rate cuts by September, they haven’t fully factored in a cut until the Federal Reserve’s meeting on November 6th-7th.
What’s on the radar
Later today, all eyes will be on the European Central Bank’s monetary policy meeting. It’s widely anticipated that interest rates will remain steady on April 11, but there’s growing speculation about a potential rate cut in June, with the possibility of further adjustments later in the year.
Europe is experiencing a faster decline in its inflation rate compared to other regions, sparking discussions about the likelihood of interest rate cuts occurring sooner in Europe than in the US or UK.
Today, we’ll get updates on the producer prices in the US for March, along with the latest numbers on weekly unemployment claims.
The first quarter earnings season kicks off on Friday, featuring major financial players like JPMorgan, Citi, State Street, Wells Fargo, and BlackRock, all poised to reveal their financial performance.
Asia gripped by rate cut concerns; yen slips below 153/$
The Dow Jones Industrial Average fell by 1.09 per cent to 38,461.51, the S&P 500 dropped by 0.95 per cent to 5,160.64, and the Nasdaq Composite decreased by 0.84 per cent to 16,170.36. Most sectors in the S&P 500 saw losses except for energy, while real estate shares experienced the most significant decline.
In Asia, Japan’s Nikkei N225 declined by 0.6 per cent, China’s CSI300 blue chips eased by 0.3 per cent, and Hong Kong’s Hang Seng index dropped by 1.13 per cent.
The dollar strengthened, hitting a five-month high against major peers at 105.15, surging by 1.1 per cent overnight, its largest daily increase in over a year. It also reached a 34-year high of 153.24 yen before easing to 152.86 yen on Thursday. The US ten-year Treasury yield remained unchanged at 4.5313 per cent, following an overnight surge of 18 bps, while the two-year yield held at 4.9476 per cent, after rising by 22 bps the previous session.
In the commodities market, oil prices sustained gains after a 1 per cent increase triggered by an Israeli strike resulting in the death of three sons of a Hamas leader, sparking concerns about potential disruptions to ceasefire talks. Brent rose by 0.15 per cent to $90.62 per barrel, and US crude was up by 0.15 per cent at $86.34 per barrel. Gold prices increased by 0.4 per cent to $2,341.50 per ounce, rebounding from a 0.8 per cent decline overnight due to the strength of the US dollar.