Asian Stocks Slip as Investors Await Inflation Data and Oil Producer Meeting
SYDNEY – Asian shares declined on Monday as investors awaited crucial inflation data from the United States and Europe later in the week. In addition, a meeting of oil producers, scheduled to address the recent slide in oil prices, added to the cautious sentiment in the market.
Gold was a standout performer, reaching $2,009 an ounce and briefly touching a six-month high of $2,017.82.
Investors are also exercising caution due to the approaching month-end, considering the substantial gains they have made so far. Japan’s Nikkei edged down 0.3%, while its November performance still reflected an 8.6% increase. Similarly, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3%, with a monthly gain of 6.4%.
Chinese blue chips faced further losses, declining by 1.1%. They have failed to keep up with the global bullish sentiment, with the market down 2% in November.
China’s central banks, while noting they would encourage financial institutions to support private companies, did not provide any specific details.
Meanwhile, EUROSTOXX 50 futures slipped 0.2%, with FTSE futures also falling 0.1%.
S&P 500 futures declined 0.2%, and Nasdaq futures were down 0.4%. The S&P 500 cash index has risen consistently for the past four weeks, resulting in an impressive 8.7% increase so far in November, the highest since mid-2022.
Investors will closely monitor the upcoming release of the Federal Reserve’s preferred inflation measure on Thursday. It is expected to reflect a slowdown, reinforcing market expectations of a future interest rate cut.
Federal Reserve Chair Jerome Powell will have an opportunity to address these concerns at a Fireside Chat on Friday. In addition, there are at least seven other Fed speakers scheduled throughout the week.
Bruce Kasman, Head of Global Economics at JPMorgan, believes that central banks are unlikely to implement easing measures in the first half of 2024, unless there is a threat to economic growth or financial stability.
European Central Bank President Christine Lagarde has also indicated that she is in no rush to introduce easing measures. She will have another opportunity to emphasize this message at the EU parliament on Monday.
Data on EU consumer prices for November, expected to show a cooling in both the headline and core rates, will be released on Thursday. This data is likely to support market expectations for interest rate cuts.
The expectation of lower borrowing costs has led to a significant rally in bonds, with yields on 10-year Treasuries down 36 basis points this month, currently at 4.50%.
Consequently, the dollar has weakened against a basket of major currencies, experiencing a 3% decline this month. The euro has risen to $1.0940, not far from its four-month high of $1.0965. The dollar has also softened against the yen, reaching 149.23.
The dollar’s decline can be attributed, in part, to firmer official fixes for the Chinese yuan, as well as the strength of other Asian currencies and the Australian dollar.
The oil market faces a critical few days ahead of the OPEC+ meeting on November 30. African oil producers are reportedly seeking higher caps for 2024, while there is speculation that Saudi Arabia may extend its voluntary production cut of 1 million barrels per day, which is set to expire at the end of December.
Commodity analysts at CBA noted that OPEC+ will need to demonstrate significant supply discipline to alleviate concerns of a deep surplus in oil markets next year.
This uncertainty in the oil market erased early gains, with Brent edging down 31 cents to $80.27 per barrel. Similarly, U.S. crude lost 31 cents, reaching $75.23 per barrel.
Investors will closely observe the outcome of the OPEC+ meeting as they gauge the ability of Saudi Arabia and OPEC+ to maintain a tight oil market in 2024.
In summary, Asian stocks slipped as investors awaited inflation data from the United States and Europe. Gold prices climbed to a six-month high, and caution prevailed due to the substantial gains investors have accumulated. Central banks’ messaging regarding easing measures and the upcoming OPEC+ meeting also influenced market sentiment.
