© Reuters. FILE PHOTO: A man looks at a screen showing news about the markets update inside the Bombay Stock Exchange (BSE) building in Mumbai, India, May 23, 2019. REUTERS/Francis Mascarenhas
By Jamie McGeever
(Reuters) – A look at the day ahead in the Asian markets from Jamie McGeever.
The world is bracing for US inflation numbers on Wednesday, but before then Asia will digest a mixed performance on Wall Street, another rise in US bond yields and a major report from own inflation.
India’s consumer price inflation for March headlines a regional economic calendar on Wednesday that also includes Indian industrial production, South Korea’s unemployment and inflation for corporate goods and machinery orders from Japan.
These releases come against a backdrop where global stock markets still maintain a glass half full outlook despite the growth picture fraying around the edges and bond yields continuing to rise steadily.
Asian stock markets, in particular, are holding firm: The MSCI Asia ex-Japan Index rose 0.6% on Tuesday, its third consecutive rise and its best performance this month.
The US CPI inflation report for March will go a long way in determining what the Fed decides at its May 2-3 policy meeting. Markets expect headline inflation to continue to slow, but are still shifting towards pricing in another quarter-point rate hike.
GRAPH: US CPI inflation https://fingfx.thomsonreuters.com/gfx/mkt/jnvwylagovw/USCPI.png
GRAPH: Indian CPI inflation and policy rate https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqnmrepw/IndiaCPI.jpg
Meanwhile, India’s consumer inflation likely eased in March to 5.80% on the back of softer increases in food prices, falling below the Reserve Bank of India’s upper tolerance limit of 6, 00% for the first time this year.
The data comes less than a week after the RBI surprised markets by holding its key interest rate steady at 6.50% when most expected a 25 basis point rise.
South Korea’s February unemployment fell again to match last August’s record low of 2.6%, so a further drop in March’s reading would break new historical ground.
Finance ministers and central bank officials from around the world are in Washington for this week’s spring meetings of the International Monetary Fund and the World Bank.
The IMF on Tuesday cut its outlook for global growth for this year and next as interest rates rise, warning that the risk of “dangerous” financial turmoil could drive output close to recessionary levels.
The global lender maintained its China growth forecasts at 5.2% and 4.5%, respectively, but cut its 2023 Indian GDP growth forecast by a fifth of a percentage point to 5.9% and the outlook next year by half a point to 6.3%.
US Treasury Secretary Janet Yellen was more optimistic about global economic growth, cautioning against exaggerating ‘negativism’. She also said that she still hopes to visit China, underscoring President Joe Biden’s focus on opening and maintaining channels of communication with Beijing.
Here are three key developments that could provide more direction to the markets on Wednesday:
– IMF/World Bank spring meetings in Washington
– India CPI inflation (March)
– US CPI Inflation (March)
(By Jamie McGeever; Editing by Deepa Babington)