Asian markets fluctuated on Thursday after a record lead from Wall Street, as traders assessed US figures showing a drop in inflation that eased some pressure on the Federal Reserve to start winding down its ultra-loose monetary policy soon.
They were also keeping tabs on China after authorities unveiled plans to tighten regulation across multiple sectors over the coming years, weeks after it hit stocks by cracking down on a range of industries including tech firms.
Both the Dow and S&P 500 finished at all-time highs again, buoyed by data showing that while consumer prices rose significantly for energy and food in July, core inflation – which strips out energy and food costs – came in at 0.3 per cent, just a third of the rate in June.
The news soothed lingering concerns of accelerating inflation, which could pressure the Fed to hasten its plan to tighten the accommodative monetary policies that have been key to driving a rally across world markets for more than a year.
But there was some caution on the significance of the monthly figures for the long-term outlook.
“There is a lot being read into the month over month numbers, but one month does not make a trend,” Jeanette Garretty, chief economist at Robertson Stephens Wealth Management, told Bloomberg Television. “It is a little too early to say that this is conclusive evidence that we can see some of the heat on prices coming off.”
The moderation in price growth “feeds into the ‘peak inflation’ narrative”, said Briefing.com analyst Patrick O’Hare, while adding that the report suggested inflation could stay high.
Equities in Tokyo, Sydney, Seoul, Singapore and Jakarta edged up but there were losses in Hong Kong, Shanghai, Wellington, Taipei and Manila.
Stocks had a largely positive start to the week after a recent run of pressure caused by concerns about the fast-spreading Delta variant as well as traders taking a breather after a long-running rally.
China’s crackdowns have also had a detrimental impact, and investors continue to keep an eye on Beijing for any new developments. On Wednesday the country’s State Council signalled the government’s push to regulate sweeping parts of the economy would continue over the next five years. A statement said sectors including private tutoring, and food and drugs would see tougher legal enforcement, fuelling concerns officials were not finished with moves to tighten their grip on the economy.
China’s crackdowns have had a detrimental impact, and investors continue to keep an eye on Beijing for any new developments
Investors are also awaiting a meeting of world central bankers and financial leaders later this month in Jackson Hole, Wyoming, where Fed boss Jerome Powell’s speech is likely to be the key focus in hopes he will provide fresh clues on policy.