Market Analytics and Technical Considerations
Key Points
The majority of Asian stock markets fell in cautious trade on Friday ahead of crucial U.S. payrolls data that is anticipated to influence monetary and fiscal policy, but losses were limited by news that China planned to even further relax its stringent anti-COVID regulations.
After data revealed that the PCE inflation index, the Federal Reserve’s favored inflation indicator, stayed well above the central bank’s goal range in October, concern over the direction of U.S. inflation also weighed on Asian stocks on Friday.
The Shanghai Composite lost 0.3% and China’s blue-chip Shanghai Shenzhen CSI 300 index decreased by 0.5%. In light of mounting rumors that China will relax its rigorous zero-COVID policy, both indices were expected to increase 3.6% and 1.7% for the week, respectively.
The Hang Seng index in Hong Kong dropped 0.7% on Friday and was expected to rise 2.6% this week.
Wider Asian markets declined as uncertainty over the direction of monetary and fiscal policy increased as a result of the U.S. PCE inflation estimate. The Fed cautioned that rates could crest at higher levels if inflation stays persistently high even though it indicated that it will hike rates more slowly in the immediate future.
Given that the Federal Reserve has targeted some softness in the labor market to limit inflation, the U.S. payrolls report coming later today is also anticipated to influence the Fed’s stance on policy.
But this week, Asian markets, particularly those with a high exposure to technology, benefitted from the possibility of lesser U.S. rate increases.
The Taiwan Weighted index was trading up 1.4% for the week while South Korea’s KOSPI index was expected to rise by 0.3% in the week.
This week, Japanese stocks were a notable exception, with the Nikkei 225 index falling 1.7% on Friday and almost 2% overall.
This week’s string of dismal economic indicators increased worries about a downturn in the Japanese economy as the nation battles increasing prices and a depreciating yen.
