SYDNEY- Asian stocks traded cautiously on Monday as US earnings season gets into full swing, while a raft of Chinese data will offer insight into how the world’s second-largest economy is recovering.
Markets have also seen a mood shift on the outlook for US interest rates, with CME futures implying an 83 percent chance the Federal Reserve will hike by a quarter point to 5.0-5.25 percent in May.
Resilience in core US retail sales and a jump in inflation expectations reported on Friday has led investors to trim the amount of easing expected later this year to around 55 basis points (bp).
“Early April data on the labor market, inflation and consumption all indicate the Fed has more work to do and that a soft or bumpy landing is a greater probability than a sharp and relatively sudden contraction in activity,” said analysts at ANZ in a note.
“Our baseline view is for two more 25 bp hikes and, if data does not start to weaken soon, the market will need to reprice for no rate cuts in the second half of this year.”
At least eight top Fed officials are speaking this week, including three governors, and could generate plenty of headlines to move the dial further.
The resulting caution saw MSCI’s broadest index of Asia-Pacific shares outside Japan ease 0.3 percent, while Japan’s Nikkei went flat.
EUROSTOXX 50 futures edged up 0.3 percent and FTSE futures 0.2 percent.
Chinese blue chips added 0.7 percent ahead of data on retail sales, industrial output and gross domestic product due on Tuesday, where analysts suspect the risks are for an upside surprise given recent strength in trade.
Figures over the weekend showed new home prices climbing at the fastest pace in 21 months, supporting consumer demand and confidence.
S&P 500 futures inched up 0.2 percent, while Nasdaq futures were flat as investors awaited a slew of earnings reports led by Goldman Sachs, Morgan Stanley and Bank of America. – Reuters
