Asian stocks rise as investors await key data

Asian stocks climbed on Monday, with Japan out of the market providing a respite from recent volatility. Investors are now focused on upcoming US and Chinese economic data for insights into global growth prospects.

Key for the Federal Reserve will be US consumer price data due on Wednesday. Economists predict a 0.2 per cent increase in both headline and core inflation, with the annual core rate slowing slightly to 3.2 per cent.

“That would likely bolster the Fed’s confidence that disinflation is ongoing, allowing for a rate cut in September, but a core run-rate still above target should also speak against a larger 50bp cut or an intra-meeting cut,” said analysts at Barclays in a note.

They also expect a strong 0.8 per cent month-over-month increase in retail sales, indicating continued consumer resilience.

Beyond retail sales, data on industrial output and housing starts, as well as various surveys, will be released. The market currently implies a 49 per cent chance of a 50-basis point Fed rate cut in September, down from 100 per cent a week ago.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.6 per cent, led by a 1.6 per cent jump in Taiwan. Chinese blue chips edged up 0.1 per cent.

European and US futures also traded higher. Earnings season is progressing with around 91 per cent of S&P 500 companies reporting, and 78 per cent beating estimates. Walmart and Home Depot results this week will offer clues about US consumer spending.

China will release retail sales and industrial production data on Thursday, which are expected to show continued economic underperformance, reinforcing the need for more stimulus.

In the currency markets, the dollar rose by 0.2 per cent to 146.92 yen, rebounding from last week’s low of 141.68. The euro remained stable at $1.0915.

BofA FX strategist Shusuke Yamada believes that the unwinding of yen carry trades, where investors borrow at low rates to invest in higher yielding assets, has largely completed, as speculative yen short positions have decreased by 60 per cent.

Oil prices rose slightly after a 3.5 per cent increase last week due to concerns about a potential conflict in the Middle East impacting supplies.

Brent crude increased by 20 cents to $79.86 per barrel, and US crude went up by 34 cents to $77.18 per barrel.

Attribution: Reuters