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Markets Update: APAC Stocks Retreat Amid Quiet Trading, Tokyo CPI Disappoints; Europe Steady Ahead of Data.
Economic Calendar
Global Markets Roundup: 26 Jan 2023
Asia-Pacific equities faltered on Friday, failing to maintain the positive momentum from Wall Street. The region traded mostly lower in subdued conditions, lacking fresh catalysts to drive activity. Tokyo's core inflation data disappointed, coming in at its slowest pace since March 2022. This weak reading further adds to concerns about Japan's fragile economic recovery and the Bank of Japan's ultra-loose monetary policy. Major currency pairs remained contained in quiet trading. The U.S. Dollar Index (DXY) hovered just above the 103.50 mark, while USD/JPY fluctuated after the Tokyo CPI release. European equity futures point to a flat open, with the Euro Stoxx 50 future unchanged following a 0.4% gain in the cash market on Thursday. Investors await fresh economic data to guide further direction.
ASX 200 closed for the Australia Day holiday. Japan's benchmark Nikkei 225 faced selling pressure, dipping below the psychologically important 36,000 mark. The decline came despite softer-than-expected Tokyo inflation data, which showed the slowest pace of core inflation in the capital area since March 2022. Analysts attributed the weakness to profit-taking following recent gains and a lack of fresh catalysts to drive further upside. Hong Kong's Hang Seng Index and China's Shanghai Composite Index experienced choppy trading throughout the session. Both indices initially benefited from the fading effects of recent Chinese support measures, but gains proved unsustainable. Concerns about the global economic outlook and ongoing geopolitical tensions weighed on investor sentiment, limiting upward movement.
Currencies:
DXY: The dollar index (DXY) remained directionless after a week of mixed economic data from the US. Investors are now eyeing the release of the Personal Consumption Expenditures (PCE) inflation data, the Federal Reserve's preferred inflation gauge, due later in the day.
EUR/USD: The euro continued to struggle after slipping following the European Central Bank's (ECB) recent announcement and press conference. The bank maintained its hawkish stance, suggesting further rate hikes ahead, which weighed on the euro.
GBP/USD: The British pound found its footing after recent oscillations around the 1.2700 level. Lack of fresh catalysts and the upcoming UK bank holiday next week kept trading subdued.
USD/JPY: The Japanese yen edged higher against the dollar despite softer Tokyo inflation data. The Bank of Japan's (BoJ) December meeting minutes offered little excitement, leaving investors waiting for clues on the bank's next move.
AUD and NZD:Â The Australian and New Zealand dollars were flat as a lack of fresh news and the closure of Australian markets for the Australia Day holiday limited activity.
Fixed Income:
US Treasuries: US Treasury futures continued their upward climb, buoyed by yesterday's softer-than-expected PCE inflation data and a strong GDP report. Additionally, dovish comments from ECB President Christine Lagarde and a decent 7-year Treasury auction supported the rally.
German Bunds: German Bund futures followed their US counterparts higher, extending gains after the ECB hinted at a possible change in its hawkish stance. A source report suggested that policymakers are open to discussing rate cuts in March if inflation data confirms a downward trajectory towards the 2% target.
Japanese Government Bonds (JGBs):Â 10-year JGB futures tracked their peers higher after softer-than-expected Tokyo inflation data for January.
Commodities:
Crude Oil: Crude oil futures pulled back slightly after rallying the previous day on Middle East tensions, China's stimulus measures, and strong US GDP data. A delay in a Qatari LNG cargo due to the ongoing conflict in the Red Sea added to the cautious sentiment.
Gold: Spot gold remained within a narrow range ahead of the release of the Fed's PCE inflation data. Investors are keen to see if the data reinforces or challenges the central bank's hawkish stance, which could have a significant impact on gold prices.
Copper: Copper futures traded sideways as risk appetite remained subdued across the Asia-Pacific region. Lack of fresh catalysts and concerns about global economic growth kept the metal under pressure.
Key Events to Watch:
Eurozone M3 money supply data
U.S. Personal Consumption Expenditures (PCE)
European Central Bank Survey of Professional Forecasters
Earnings reports from Volvo, Remy Cointreau, Lonza, and American Express
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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