April 17, 2023 (MLN): Asian markets wobbled on Monday as traders weighed a stronger-than-expected fall in U.S. retail sales and a Federal Reserve official’s support for further monetary tightening, APP reported.
Sentiment was helped by better-than-expected earnings by US banking titans, which eased worries about the sector following last month’s turmoil that saw three regional lenders go under.
Investors built on last week’s broad recovery, which came on the back of data showing inflation had fallen faster-than-expected last month, raising hopes that the Fed is about to end its rate-hiking campaign.
Analysts said that while the 1% fall in retail sales – twice as much as forecast – could give the Federal Reserve more room to maneuver, it also revived fears that the world’s leading economy could slide into recession.
Despite numbers pointing to falling prices, a University of Michigan poll on Friday showed consumer inflation expectations rose to 4.6 percent annually this month, from 3.6 percent in March.
Meanwhile, Fed Governor Christopher Waller dampened hopes that the bank would soon wind down its tightening campaign, saying on Friday rates should continue to rise as inflation remains high.
“As financial conditions have not tightened significantly, the labor market remains strong and rather tight, and inflation is well above target, monetary policy needs to be tightened further,” he warned.
“How far ahead depends on incoming data on inflation, the real economy and the extent of credit tightening.”
Commentators said there was general belief the Fed would hike borrowing costs by 25 basis points next month, although some say another could be on the way for June.
Asian investors moved nervously at the start of the week.
Hong Kong, Shanghai, Sydney, Singapore and Taipei rose while Tokyo, Seoul and Manila fell.
Rising volatility
Frances Stacy of Optimal Capital Advisors warned: “I don’t think all rate hikes have made their way through the system and it looks like the Fed will tighten further.
“I don’t think we’re quite out of the woods yet, but that doesn’t mean the risk is going to happen overnight, but if something does hit, markets can drop quite dramatically.”
And Fidelity International’s Marty Dropkin added: “The recent banking fallout may have been contained, but its impact has trickled back into global stock market conditions.
“We remain cautious on global equities and expect volatility to increase as sales pressures worsen in the coming months as labor and financing costs rise and other cyclical indicators weaken.”
Financials in Asia led the way after earnings reports from Wall Street giants JPMorgan Chase and Citibank beat forecasts.
The numbers eased worries about the state of the banking sector that rocked markets last month after the collapse of the three US lenders and the takeover of Credit Suisse.
Traders are eagerly awaiting the release of China’s growth data on Tuesday, which will provide a first snapshot of how the economy fared in the first full quarter absent painful zero-Covid restrictions.
Analysts polled by AFP expect average year-on-year growth of 3.8 percent from January to March.
Copyright Metti’s Link News
Posted on: 2023-04-17T09:48:43+05:00
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