MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1%, after rallying for three successive weeks
Asian shares eked out a 15-month peak on Monday in a week where inflation figures could make or break hopes for earlier U.S. rate cuts, while Chinese activity data will test optimism about a sustained recovery in the world’s second-largest economy.
Beijing has already reported a rise in inflation to an annual 0.3% in April, helping to soothe concerns about a decline into prolonged deflation. Forecasts favour further gains in April retail sales and industrial output due on Friday.
Chinese authorities are also set to sell 1 trillion yuan ($138.24 billion) in longer-dated bonds to help fund stimulus spending at home.
The improved sentiment has helped lift Chinese blue chips to a seven-month peak. The index was 0.1% softer on Monday with some sectors pressured by reports the White House was about to release details of new tariffs on Chinese goods.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.1%, after rallying for three successive weeks.
Japan’s Nikkei slid 0.3%, still saddled with speculation further losses for the yen could lead the BoJ to hike rates in the next few months.
Globally, much now depends on whether the U.S. April inflation report will show a moderation following three months of upside surprises. Median forecasts are for core consumer prices to increase 0.3% in the month, compared with 0.4% in March, pulling the annual rate down to 3.6%.
Our unrounded core CPI forecast at 0.27% m/m suggests larger risks for a dovish surprise to a rounded 0.2% increase, noted analysts at TD Securities.
A low number would likely boost bets the Fed could ease as soon as July, which is currently priced at only a 25% probability. Equally, a high inflation figure could push a rate cut out past September and challenge pricing for 42 bps of easing this year.
Also due are figures on U.S. producer prices, retail sales and jobless claims, along with final reports on European inflation that should reinforce expectations for a June rate cut from the ECB.
