Asian share markets followed Wall Street lower on Monday while the dollar looked vulnerable ahead of a reading on U.S. inflation that could hasten, or delay, the start of global rate cuts.
The yen edged higher as data released on Monday showed Japan was not, in fact, in recession after economic growth was revised up to an annualized 0.4% for the December quarter.
A growing number of Bank of Japan policymakers are warming up to the idea of ending negative rates this month on expectations of hefty pay hikes in this year’s annual wage negotiations.
We continue to expect four 25bp cuts in the Fed funds rate this year, starting in June, analysts at Goldman Sachs wrote in a note. However, the soft employment report increases the odds that the FOMC begins the easing cycle in May instead.
Chinese price data showed a welcome bounce in inflation to 0.7% in February, though producer prices remained mired in deflation.
Hopes for lower borrowing costs have been a fillip for equities with MSCI’s broadest index of Asia-Pacific shares outside Japan easing 0.3%, after hitting an eight-month peak on Friday.
The decline in the dollar and bond yields has been supportive of non-yielding gold, which was up at $2,180 an ounce, having surged 4.5% last week to record peaks.
Oil prices have had a tougher time as worries about China’s demand offset supply cuts by producer group OPEC+.
Brent dipped 27 cents to $81.81 a barrel, while U.S. crude edged down 23 cents to $77.78 per barrel.
