HONG KONG - Asian markets were mixed yesterday ahead of much-anticipated US inflation data, which comes against a backdrop of renewed concerns that the Federal Reserve could announce another interest rate hike before the end of the year.

The feel-good factor that characterised much of July has given way to uncertainty about the US central bank’s plans following a mixed jobs report and warnings from policymakers that more was needed
to finally get prices under control.

Ongoing weaknesses in China’s economy – and lack of concrete action by authorities to address it – are also taking their toll on investor sentiment, helping to drive a retreat in global markets in recent weeks.

All eyes were on the release later yesterday of the US consumer price index for last month, a closely watched gauge of inflation that plays a key role in the Fed’s decision-making on monetary policy.

While rate hikes have dampened steep price rises – from a four-decade high of 9.1 percent in June last year to three percent now – observers warned officials would find it harder to get inflation back down to its two percent target. After falling for 12 straight months, forecasts are for a slight uptick in the CPI, partly because of rising oil costs.

However, core inflation is tipped to ease again, which commentators said should allow the Fed to stand pat on rates at its next meeting in September.

The US central bank hiked in July but indicated that could be the last such move, after more than a year of tightening. Fawad Razaqzada, at City Index and Forex.com, said a “small beat” would be tolerable for investors.

“A goldilocks outlook in the US is what stock market investors on Wall Street have been enjoying this year – until the recent weakness,” he said in a note.

“They will be looking for signs that the health and sentiment of the consumer remains positive, enough
not to increase the risks of a further Fed rate increase, and yet not too
depressing to raise recession alarm bells.” All three main indexes on Wall Street ended in the red on Wednesday, dragged by tech firms, and Asia largely followed suit.

Tokyo, Shanghai, Sydney, Singapore and Jakarta edged up slightly but
Seoul, Wellington, Mumbai, Bangkok, Taipei and Manila were all down.

Hong Kong was barely moved.

Luxury and travel firms boosted European markets after China lifted a Covid-era ban on outbound group tours to dozens of countries, which could see crowds of Chinese tourists return to destinations around the world.

London, Paris and Frankfurt rallied in the morning.

Investors are keeping tabs on China, hoping for measures to support the ailing economy, after news that the country had slipped into deflation for the first time in more than two years and exports plunged at their fastest pace since the early days of the pandemic. 

- Nampa/AFP