Asian markets are poised for an upward trajectory, buoyed by the robust performance of global equities, particularly those in the US, as Bond yields exhibit signs of easing. Both the Hang Seng and Shanghai Composite indices look set to continue their ascension, bolstered by a more positive market sentiment in the wake of a surge in the tech sector. This upward trend stems from burgeoning hopes that China may soon conclude its rigorous tech industry regulations. However, despite this optimistic outlook, mainland gains might face some constraints, given the recent underwhelming Chinese inflation data that failed to meet forecasts. This data showed a stagnation in consumer inflation on the mainland and an exacerbated contraction in factory gate prices. Amidst these developments, investors globally have shifted their focus to U.S. economic indicators. Particularly, this Wednesday’s U.S. Consumer Price Index data is anticipated to have a considerable impact on the market’s perception of the Federal Reserve and future inflation expectations. This is with the caveat that projections of a decelerating Core CPI throughout the summer hinge on a decline in used auto prices.
The dissipating inflation trend has emerged as a key area of interest for global market players, particularly in light of China’s CPI data that has come in below expectations. This aligns with a 4.2% month-on-month drop observed in the latest Manheim used car index. Other critical market themes to monitor include the forthcoming special rebalance of the Nasdaq and China’s inflation trajectory. It’s noteworthy to mention that amidst concerns of a recession, a lower yield environment could potentially provide a sustained boost to the tech sector. This is due to the lower refinancing rates, which traditionally favour long-duration sectors.
