A look at the day ahead in European and global markets from Asia markets correspondent Kevin Buckland.
European investors hoping for clues on market developments in Asia may be disappointed today.
Overall, market sentiment was cautious ahead of the week’s trading highlight, Wednesday’s US CPI report, which will test the market’s view that the Fed is done raising rates.
A regional equity benchmark slipped from more than two-week highs, the dollar was firm and government bond yields remained high, although falling somewhat in Tokyo. Crude oil and gold basically did not move.
However, the region’s largest stock markets were outliers: Japan’s Nikkei rebounded sharply from losses in the previous session as strong gains boosted the steel sector, and mainland China’s blue chips bounced, showing little interest in data showing an unexpected decline of imports last month and slowdown in exports.
Every US economic indicator has gained prominence after Fed Chair Jerome Powell signaled last week that the policy path will depend on incoming data.
Reuters graphics
And there are several other reasons why investor attention is firmly focused on the US, as the debt ceiling dispute has stalled and banking sector problems smolder.
Lenders were given a bit of a breather overnight after Treasury Secretary Janet Yellen said regulators were ready to use the same tools used in previous bank bailouts.
The Fed’s quarterly Senior Loan Officer Opinion (“SLOOS”) survey also boosted sentiment, showing tighter credit conditions but no looming credit crunch. The caveat, however, is that the results missed the recent turmoil surrounding First Republic and PacWest.
Yellen also warned that not raising the debt limit would deal a major hit to the US economy and weaken the dollar as the world reserve currency, reiterating that the government could run out of cash by June 1.
Key developments that could impact markets on Tuesday:
– ECB Executive Board members Philip Lane and Isabel Schnabel will speak at separate events
– US National Federation of Independent Business (NFIB) April Small Business Survey
– President Joe Biden and Republican lawmakers meet to discuss debt ceiling standoff
Reporting by Kevin Buckland; Edited by Muralikumar Anantharaman
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