Asian stocks waver ahead of U.S. inflation data and central bank rate decisions

SINGAPORE  -Asian stock markets slipped after making early gains on Tuesday, as investors waited for U.S. inflation data that many hope will persuade the Federal Reserve and other central banks to step back from aggressive interest rate hikes.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.10 percent in midday trade while Japan’s Nikkei and Australian shares were 0.35 percent and 0.24  percent higher respectively. Seoul’s KOSPI index was down 0.10 percent.

China’s CSI300 Index and the Shanghai Composite Index fell 0.33 percent and 0.21 percent respectively as a fears of a surge in COVID-19 infections following the dismantling of key parts of government’s zero-COVID policy clouded the outlook for the world’s second biggest economy.

But a tourism-linked index jumped more than 2 percent as Hong Kong eased COVID-19 restrictions for inbound travellers.

Beyond China, investors’ main focus was on U.S. inflation data due out at 1330 GMT on Tuesday, with core CPI inflation expected to slow from 6.3 percent to 6.1 percent and headline inflation dropping to 7.3 percent.

Treasury Secretary Janet Yellen struck a cautious note on Sunday in saying she expected a substantial slowdown in 2023 inflation, but that the U.S. economy remained prone to shocks.

Later this week, the Fed, European Central Bank and the Bank of England are all expected to raise rates by 50 basis points (bps), rather than the aggressive 75 bps hikes they went with earlier in the year.

“Given the very close proximity (of U.S. CPI data) to the FOMC, it clearly has the ability to change the tone of the message … but is highly unlikely to change the headline 50 bps hike,” Deutsche Bank said in a research note.

The dollar index, which measures the greenback’s value against six major currencies, was flat at 105.01.

Oil prices rose further after jumping on Monday due to supply jitters, with Brent crude futures up 1.17 percent at $78.90 a barrel and U.S. West Texas Intermediate crude up 1.15 percent at $73.99 a barrel.

Spot gold hovered around $1,781.50 per ounce, while U.S. gold futures were up 0.01 percent at $1,792.5.