Hong Kong: Asian investors on Monday struggled to build on last week s gains as profit-takers stepped in while awaiting the next buying catalyst, with eyes on the upcoming release of key US jobs data.
Still, despite worries that the expected surge in economic activity this year will send prices soaring and force central banks to tighten monetary policy, a forecast-beating jump in a closely watched US inflation gauge was taken in stride.
The calm reaction marked a change from recent times, with benchmark 10-year Treasury yields, a key gauge of future interest rates, inching down slightly.
“There is likely more upside to go on the inflation scare front in the months ahead as base effects, the lagged impact of commodity price hikes and bottlenecks continue to feed through, but there are now a few more signs that it will be transitory,” AMP Capital s Shane Oliver said.
Despite Asian volatility, the three major US indexes all closed slightly higher on Friday.
Tokyo, Hong Kong, Shanghai, Sydney, Singapore and Manila fell, but Seoul, Taipei, Jakarta and Wellington rose.
Data showed that the growth of China’s factor activities slowed slightly in May, and there was little response to this.
The focus now is on the US employment data released this week, which will provide the latest information on the recovery of the world’s top economies from the collapse caused by the pandemic last year.
Patrik Schowitz of JP Morgan Asset Management said: “In the face of uncertainty about the interaction between worrying inflation and the highly anticipated growth recovery, the market is still looking for a direction.
“There still seems an extended growth runway ahead as further regions around the globe get the Covid and vaccination situation under control — nothing we re seeing is really challenging that expectation, although it will take time, especially across some of the major emerging market economies.”
Oil prices edged up and are approaching levels not seen since January last year before the pandemic hammered demand. Crude traders are also keeping tabs on a meeting of OPEC and other major producers Tuesday where they will decide on whether or not to lift output as the world economy bounces back.
They will also be looking for any comments on the prospect of Iranian oil returning to the market if Tehran reaches a new nuclear agreement with global powers.