Hong Kong, China – Asian markets mostly rose Tuesday as investors welcomed the extension of a China-US tariff truce but looked ahead apprehensively to the release of key US inflation data later in the day.
First up is the US consumer price index (CPI) later in the day, which could play a major role in the Federal Reserve’s decision-making with regard to interest rates.
Bets on a cut have ramped up in recent weeks owing to signs that the world’s number one economy is showing signs of slowing, with figures indicating this month that the labour market softened considerably in the past three months.
Expectations are for CPI to come slightly above June’s reading, but analysts warned investors were walking a fine line.
“CPI is the storm front straight ahead. A soft number, and the market exhales. A hot number, and the stagflation whisper becomes the only language anyone speaks,” said SPI Asset Management’s Stephen Innes.
While there have been warnings that the tariffs will stoke inflation National Australia Bank’s Ray Attrill said: “The larger tariff impacts… probably will not be felt until August/September, with firms now only gaining some clarity on the degree of reciprocal tariffs.
“The current profit reporting season has noted firms on the whole were waiting for greater clarity on final tariff rates before adjusting prices.”
Also on the agenda this week are wholesale prices and retail sales, with the Fed’s favoured gauge of inflation at the end of the month. Bank officials are then set to make their decision in the middle of September.
Forecasts are for a reduction at that gathering and one more before the end of the year.
In early trade, Tokyo rallied more than two percent as markets reopened after an extended weekend, while Shanghai, Sydney, Seoul, Taipei and Manila also advanced.
Hong Kong, Singapore and Wellington dropped.
Key figures at around 0200 GMT
Tokyo – Nikkei 225: UP 2.5 percent at 42,845.43
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 24,886.23
Shanghai – Composite: UP 0.2 percent at 3,655.09
Euro/dollar: UP at $1.1619 from $1.1617 on Monday
Pound/dollar: DOWN at $1.3432 from $1.3435
Dollar/yen: UP at 148.28 yen from 148.12 yen
Euro/pound: UP at 86.50 pence from 86.47 pence
West Texas Intermediate: UP 0.1 percent at $64.03 per barrel
Brent North Sea Crude: UP 0.2 percent at $66.74 per barrel
New York – Dow: DOWN 0.5 percent at 43,975.09 (close)
London – FTSE 100: UP 0.4 percent at 9,129.71 (close)
