- MSCI Asia ex-Japan hits highest level since April 21st
- The Fed is expected to refrain from raising interest rates this week
- Oil slips over 1% on China concerns
SINGAPORE, Jun 12 (Portal) – Asian stocks faltered in cautious trading on Monday as investors braced for central bank decisions in Europe, Japan and the United States this week, as well as US inflation data that are likely to influence Federal Reserve monetary policy will affect.
MSCI’s broadest index of Asia Pacific equities outside Japan (.MIAPJ0000PUS) rose 0.07% to 521.24 after hitting a more than a month high of 521.94 earlier in the session. The index is up 4% for the month. Japan’s Nikkei (.N225) rose 0.41% as Australia closed.
Futures suggested European stocks would open higher, with the Eurostoxx 50 future up 0.35%, the German DAX future up 0.34% and the FTSE future up 0.40%. E-mini futures for the S&P 500 were up 0.13%.
Last week, the Reserve Bank of Australia and Bank of Canada stunned markets by raising interest rates to curb stubborn and stubborn inflation, stoking fears that the Fed will follow suit and adopt a more hawkish stance at its June meeting could.
Citi strategists said the Fed could face the lesson learned by other central banks like the Bank of Canada: more tightening is needed to bring inflation to 2%.
According to CME’s FedWatch tool, markets are reckoning with a 71 percent chance the Federal Reserve will hold at its June 13-14 meeting.
“It’s a tight decision between a 25 basis point hike or a ‘bounce’ … and will drop to the CPI on Tuesday,” Citi said in a note.
Citi expects the Fed to hike rates by 25 basis points. “The simplest course of action, if the recognition interest should be higher, is to raise the interest rate.”
While doubts remain among investors over which path the Fed will take this week, they are more confident that the European Central Bank, which meets on Thursday, will hike rates and remain hawkish.
“We expect (ECB President) Lagarde to maintain a hawkish stance on inflation, arguing that more needs to be done on the inflation front,” said Mohit Kumar, economist for Europe at Jefferies.
“It is unlikely that Lagarde will give any indication that they are ready to pause after July, which is what the market is currently pricing in,” said Kumar, who expects the ECB to hike rates by 25 basis points.
In China, the Shanghai Composite Index (.SSEC) fell 0.3%, while Hong Kong’s Hang Seng Index (.HSI) slipped 0.45%. China’s faltering economic recovery from the COVID-19 crisis has weighed on equities, and investors are hoping for more policy stimulus as weak manufacturing and exports weigh on the broader outlook this year.
After weaker-than-expected inflation in May, data on credit, retail sales and industrial production in China this week could also come in below forecasts.
The People’s Bank of China (PBOC) is set to roll over a 200 billion yuan ($28.00 billion) series of medium-term political loans maturing on Thursday, and the focus is on the rate at which they will be rolled over .
A cut, possible as China’s post-pandemic recovery has stalled, would widen the gap between US and Chinese interest rates and could weigh on the yuan.
In the forex market, the dollar index, which measures the US currency against six major peers, rose 0.087%, while the euro fell 0.07% to hit $1.074.
The yen weakened 0.06% to 139.44 per dollar ahead of the Bank of Japan’s (BOJ) monetary policy meeting on Friday.
The BOJ is expected to maintain ultra-loose monetary policy this week and forecast a modest economic recovery.
Elsewhere, the Turkish lira fell to another all-time low of 23.77 per dollar as investors waited for any indication of policy action following the appointment of a new central bank governor.
US crude fell 1.33% to $69.24 a barrel and Brent was at $73.82, down 1.3% on the day. Both benchmarks posted their second straight weekly decline last week, as disappointing economic data from China raised concerns about demand growth at the world’s largest crude oil importer.
Spot gold fell 0.1% to $1,959.29 an ounce. US gold futures fell 0.15% to $1,959.30 an ounce.
Edited by Jacqueline Wong; Edited by Simon Cameron-Moore
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