Asia stocks rally, dollar restrained before inflation test
Asian share markets rallied on Monday on hopes a key reading on U.S. inflation will show some cooling, while the U.S. dollar was restrained by the risk of higher European interest rates and Japanese intervention.
Holidays in China and South Korea made for slow trading, while traders were unsure what implications Ukraine’s surprising success against Russian forces might have. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5%, having bounced modestly from a two-year low hit last week. Japan’s Nikkei added another 1.1%, after rallying 2% last week.
Chinese blue chips firmed 1.3% ahead of retail and industry data due later in the week that may show some improvement in August after a disappointing July. Wall Street looked to extend Friday’s bounce and S&P 500 futures edged up 0.1%, while Nasdaq futures gained 0.2%. EUROSTOXX 50 futures gained 0.7% and FTSE futures 0.3%. Bulls are hoping Tuesday’s reading on U.S. consumer prices will hint at a peak for inflation as falling petrol prices are seen pulling down the headline index by 0.1%, according to a Reuters poll.
The core is forecast to rise 0.3%, though some analysts see a chance of a softer report. “Arguably, with the economy having contracted through the first half, and household discretionary spending capacity under significant pressure, we are due a modest downside surprise,” said economists at Westpac. “As such, we forecast +0.2% for core and -0.2% for headline,” they added.
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