Moving markets today: Asian markets open lower, oil prices extend decline; China’s consumer prices up, Bank of Japan signals hawkish stance by scaling back JGB purchase; focus shifts to US inflation and Walmart earnings 

In Asian markets, cautious sentiments prevailed at the start of the week as investors awaited crucial inflation data from the US, which could influence expectations regarding potential adjustments to interest rates. The decline in oil prices continued, fueled by concerns over weak fuel demand and a strengthening dollar. On the other hand, gold prices saw a modest uptick, driven by speculation surrounding a potential interest rate cut by the Federal Reserve following disappointing US employment figures. China reported a third consecutive monthly increase in consumer prices, suggesting a gradual recovery in demand. Additionally, the Bank of Japan’s decision to scale back its purchase of Japanese government bonds hinted at a more hawkish stance. Focus now shifts to the US April inflation report, with forecasts anticipating a moderation after several months of higher-than-expected readings. Alongside this, key data releases include US producer prices, retail sales, and jobless claims, while final reports on European inflation are expected to reinforce expectations of a rate cut from the European Central Bank in June. Investors will also closely monitor speeches from various Federal Reserve officials throughout the week, including Fed Chair Jerome Powell, scheduled to speak alongside the head of the Dutch central bank. Here are five key takeaways for your day. 

China’s consumer prices extend third month of growth, indicating demand revival

China experienced its third consecutive month of rising consumer prices in April, signalling a strengthening in domestic demand, even as producer prices continued to decline. This trend comes as Beijing grapples with challenges in stabilizing its economy.  

Data released by the National Bureau of Statistics revealed a 0.3 per cent year-on-year increase in consumer prices, compared to a 0.1 per cent rise in March, surpassing economists’ expectations of a 0.2 per cent uptick. Core inflation, excluding volatile food and fuel prices, also saw a slight increase from 0.6 per cent in March to 0.7 per cent in April. Overall, the consumer price index (CPI) rose by 0.1 per cent from the previous month, defying forecasts of a 0.1 per cent decrease and reversing the 1 per cent decline seen in March. But the producer price index (PPI) dropped 2.5 per cent year-on-year in April, extending a 1.5-year decline. 

On the flip side, Chinese authorities have initiated plans to sell 1 trillion yuan worth of long-term bonds as part of efforts to boost economic activity. 

President Joe Biden is preparing to unveil fresh tariffs on China, expected as early as Tuesday. These tariffs will specifically target key sectors, such as a significant increase in levies on electric vehicles (EVs), Reuters reported. 

Bank of Japan sends hawkish signal by scaling back JGB purchase

The Bank of Japan signalled a more hawkish stance by cutting the amount of Japanese government bonds it planned to purchase in its regular operation. Specifically, it reduced the offer amount for bonds maturing in 5-10 years from 475 billion yen to 425 billion yen, while still staying within the previously announced range of 400-550 billion yen. 

UK employers set to implement 4 per cent pay increases in coming year: CIPD survey

A recent survey conducted by the Chartered Institute of Personnel and Development (CIPD) revealed that British employers foresee a 4 per cent increase in wages over the next year, a figure consistent with findings from three months ago. This suggests that businesses are hesitant to bear the burden of higher labour costs. 

The survey noted that expected median pay settlements in the private sector are holding steady at 4 per cent, while projections in the public sector remain at 3 per cent. This cautious approach comes as British consumer price inflation has slowed to 3.2 per cent in March, with the Bank of England expecting a further decrease to around 2 per cent in April, primarily due to a reduction in regulated energy prices, Reuters reported. 

Key events to watch this week

This week holds several key events that could significantly impact trading activity. One of the main highlights is the release of US April inflation data on Wednesday, which is expected to influence market dynamics. Additionally, China will announce its policy rate decision, and the Eurozone will provide updates on both inflation and economic growth. We’ll also hear from several Federal Reserve officials, including Powell, adding to the market’s focus. 

On the economic front, Australia awaits job data and the government’s unveiling of spending plans for the upcoming year. Key data points to watch include UK unemployment figures on Tuesday, which could signal potential interest rate adjustments, along with German inflation numbers and Japan’s initial estimate of first-quarter GDP on Thursday. Expect a flurry of speeches from central bankers, contributing to market sentiment. 

Amidst these macroeconomic events, attention will also be on corporate earnings reports. Companies such as Walmart, Alibaba, BT, Vodafone, Greggs, Tencent, JD.com, and Bayer will be closely watched. Notably, the hospitality sector, represented by UK pub group Marston’s, is expected to report increased half-year profits, driven by strong trading performance during the festive period. 

Asian markets mixed; South Korean equities up, won slips

Monday kicked off with South Korean stocks edging up slightly, marked by a 0.3 per cent rise in the Kospi index. However, the country’s currency, the won, faced a minor setback, weakening by 0.2 per cent against the dollar, settling at Won 1,372.97.  

In Japan, the Topix index saw a 0.2 per cent decline, paralleled by a 0.1 per cent slip in the yen against the dollar, reaching ¥155.89. Australia’s S&P/ASX 200 index followed suit, dropping by 0.2 per cent. 

Across the sea in China, the CSI 300 stock index experienced a 0.6 per cent decrease, while the CSI 2000 index, tracking small-cap stocks, took a more significant hit, plummeting by 1.3 per cent. Hong Kong’s Hang Seng index also faced a 0.6 per cent loss, notably with the Hang Seng Mainland Properties index down by 1.3 per cent. 

Looking at futures markets, S&P 500 and Nasdaq futures held steady on Monday, maintaining stability after a robust performance last week driven by strong company earnings. The dollar remained firm at 155.92 yen. 

In the realm of commodities, gold was priced at $2,362 per ounce, following a 2.5 per cent increase last week attributed to demand from momentum funds and consistent buying from China. 

On the energy front, oil prices experienced a retreat towards the end of the previous week due to rising US gasoline and distillate inventories leading up to the summer driving season. Brent crude saw a decline 0.40 per cent, settling at $82.46 per barrel, while US crude dipped 0.35 per cent to $77.99 per barrel.