MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8 per cent, after jumping 7.7 per cent last week
Asian share markets were mixed on Monday as a top US central banker warned investors against getting carried away over one inflation number, while Chinese stocks gained on signs of aid for the hard-hit property sector.
A modest miss on US inflation was enough to see two-year Treasury yields dive 33 basis points for the week and the dollar lose almost 4 per cent, the fourth biggest weekly decline since the era of free-floating exchange rates began over 50 years ago.
However, the resulting easing in US financial conditions was not entirely welcomed by the Federal Reserve with Governor Christopher Waller saying it would take a string of soft reports for the bank to take its foot off the brakes.
Waller added the markets were well ahead of themselves on just one inflation print, though he did concede the Fed could now start thinking about hiking at a slower pace.
Futures are wagering heavily on a half-point rate rise to 4.25 to 4.5 per cent in December and then a couple of quarter-point moves to a peak in the 4.75 to 5.0 per cent range.
Two-year yields edged up to 4.41 per cent, after diving as deep as 4.29 per cent on Friday.
The CPI downside surprise aligns with a broad range of indicators pointing to a downshift in global inflation that should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere, said Bruce Kasman, head of economic research at JPMorgan.
This positive message needs be tempered by the recognition that downshift in inflation will be too little for central banks to declare mission-accomplished, and more tightening is likely on the way, he said.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8 per cent, after jumping 7.7 per cent last week.
Japan’s Nikkei eased 0.6 per cent, while South Korea went flat. S&P 500 futures dipped 0.3 per cent and Nasdaq futures lost 0.4 per cent.