Asian Stocks Steady as Investors Await Inflation Data and OPEC+ Meeting
Asian shares began the week on a cautious note as investors awaited key inflation data from the United States and Europe. The upcoming data release, along with a meeting of oil producers, could have a significant impact on the markets and potentially halt or extend the recent decline in oil prices.
Investors are also exercising caution due to the month-end approaching, as they sit on substantial gains. Japan’s Nikkei added 0.3 percent after surging 9 percent in November. Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan remained flat but has gained 6.7 percent for the month.
In the futures market, S&P 500 futures dipped 0.1 percent, while Nasdaq futures lost 0.2 percent. The S&P 500 has been on a four-week rally, experiencing an 8.7 percent increase for the month, the best performance seen since mid-2022.
The Federal Reserve’s preferred measure of inflation is set to be released on Thursday and is expected to decline to its lowest level since mid-2021. This expected decrease in inflation further reinforces the market’s anticipation of a future interest rate cut.
To shed light on the matter, Fed Chair Jerome Powell will be participating in a Fireside Chat on Friday, providing an opportunity to address any concerns. Additionally, seven other Fed speakers are scheduled to speak throughout the week.
According to Bruce Kasman, Head of Global Economics at JPMorgan, central banks are unlikely to ease monetary policies in the first half of 2024 unless there is a threat to economic expansion or financial stability. This message of patience is expected to be conveyed in response to recent developments in the financial markets.
In Europe, European Central Bank President Christine Lagarde has also expressed a lack of urgency to ease monetary policies and is expected to reiterate this stance at the EU parliament meeting on Monday.
On Thursday, consumer price data for November from the European Union will be released, and it is anticipated to show a cooling in both headline and core rates. This supports market expectations for interest rate cuts.
Market projections show the likelihood of almost 90 basis points of easing by the US Federal Reserve next year and approximately 83 basis points for the European Central Bank.
The anticipation of interest rate cuts has driven a significant rally in bonds, leading to a decrease in yields on 10-year Treasuries by 37 basis points this month, currently at 4.49 percent.
Consequently, the declining yields have put downward pressure on the US dollar, which has depreciated by 3 percent against major currencies this month.
Currently, the euro is trading at US$1.0940, not far from its recent four-month high of US$1.0965, while the US dollar remains steady against the Japanese yen at ¥149.53.
The decline in yields has boosted the appeal of non-yielding gold, which is currently priced at US$2,000 per ounce, nearing its previous peak of US$2,009.29 in October.
The oil market faces a period of uncertainty ahead of the OPEC+ meeting on November 30. Originally scheduled for Sunday, the meeting was postponed as producers grapple to find a unanimous position.
Reports indicate that African oil producers are seeking higher production caps for 2024, while Saudi Arabia could potentially extend its voluntary production cut of 1 million barrels per day, which is set to expire at the end of December.
The uncertainty surrounding the meeting has kept oil prices stable on Monday, with Brent crude edging up 15 cents to US$80.73 per barrel, while US crude added 14 cents to reach US$75.68 per barrel.
Market watchers will closely monitor the inflation data releases and the outcome of the OPEC+ meeting as they anticipate their impact on the global financial landscape.
