Asian Stocks Prepare For A Deluge Of Central Bank Meetings
At the start of the week, Asian shares opened cautiously as investors gear up for a series of central bank meetings and the release of U.S. inflation data, pivotal in shaping expectations for potential rate adjustments next year.
Following an encouraging payrolls report, there's been a reduction in expectations for an imminent Fed rate cut in March, although chances remain at 76 per cent for May.
This week, the focus is on the Federal Reserve's meeting where rates are expected to remain steady at 5.25-5.50 per cent. The attention is on the rate projections ("dot plots") and Chair Jerome Powell's press conference.
Tuesday's November consumer price report holds weight in shaping future outlooks. Analysts anticipate a steady headline rate and a 0.3 per cent increase in the core rate. John Briggs of NatWest Markets foresees a CPI report favoring the Fed's stance, expecting no significant changes in the policy statement.
There's an anticipation for the ECB to cut rates early, while the Bank of England is likely to resist market expectations of cuts in the first half of 2024.
The upcoming meetings of the European Central Bank, Bank of England, Norges Bank and the Swiss National Bank carry considerable weight. Among these, only Norges Bank is seen as a potential candidate for a rate hike. Additionally, there's speculation regarding the SNB's possible intervention to weaken the franc.
Given the high stakes, caution prevails among investors, reflected in MSCI's Asia-Pacific index, which edged down by 0.08 per cent. Meanwhile, Japan's Nikkei rebounded by 1.2 per cent following last week's decline amidst discussions on potential changes to monetary policy.
Chinese markets face challenges after recent data indicating a 0.5 per cent drop in consumer prices, the sharpest decline since late 2020.
In the Treasury market, the sale of USD 108 billion in new three-year, 10-year, and 30-year paper presents a test. Despite a rise in yields post the jobs report, 10-year notes remained stable at 4.24 per cent.
Currency markets are attentive to fluctuations in the yen amid speculations surrounding the Bank of Japan's policy changes. The dollar, however, saw strength against the euro due to expectations of early ECB rate adjustments.
Gold prices dipped after the jobs report, settling at USD 1,006 an ounce. Oil prices hovered after a 3.9 per cent decline last week, balancing concerns over OPEC+ members adhering to supply cuts and the U.S. decision to replenish its strategic oil reserves.
The COP28 climate summit outcome is also under scrutiny for a groundbreaking agreement to reduce global dependence on fossil fuels.
Brent crude stood at USD 75.89 a barrel, while U.S. crude remained steady at USD 71.23.
