Markets get a jolt from the blue
A smattering of inflation data, PMIs and an interest rate decision will grab investors’ attention in the Asian session on Wednesday, against an increasingly gloomy backdrop following the latest warning that the U.S. economy is losing steam.
Annual consumer price inflation in the Philippines and Thailand is expected to slow; purchasing managers index surveys for Japan, Australia and India will be released; and New Zealand’s central bank is expected to slow the pace of rate hikes to 25 basis points.
Investors go into Wednesday on the defensive. U.S. stocks, the dollar and Treasury yields all dived on Tuesday after figures showed a surprise fall in U.S. job openings to the lowest level in nearly two years.
The monthly ‘JOLTS’ ( job openings and labor turnover survey) report comes a day after figures showed that not only did U.S. manufacturing activity shrink in March at its fastest pace in three years, all components of the Institute for Supply Management’s survey fell below the 50 growth/contraction threshold for the first time since 2009.
Global factory activity and global demand are weakening.
Rates markets no longer expect the Fed to raise rates again and are pricing in 75 basis points of easing this year. But falling yields and increased rate cut expectations are not supporting stocks and risk assets – recession fears are growing.
If the Fed does pause tightening campaign, it will be following the Reserve Bank of Australia, which kept its cash rate unchanged at 3.6 percent to break a run of 10 straight hikes.
Australian policymakers said they want time to assess the impact of past increases as the economy slows and inflation peaks. A similar message could come from the Reserve Bank of New Zealand on Wednesday, although it is still expected to hike by 25 bps.
Investors will scrutinize the accompanying commentary for any hints of an end to its tightening cycle. A slowing U.S. and global economy, and reverberations of last month’s banking shock, could tempt policymakers to ease up sooner rather than later.
Here are three key developments that could provide more direction to markets on Wednesday: New Zealand interest rate decision; The Philippines inflation (March), and Thailand inflation (March).