Asian Markets Edge Higher as Trade Talks Show Progress, Inflation Data in Focus
Asian markets edged up cautiously on Wednesday as investors were kept in check by some muted moves on the trade front. The latest meetings in London suggested a de-escalation of sorts as a consolation prize after a turbulent few months.
Japan's Nikkei index added 0.4 % to the gains it made earlier in the month. Australian stocks added 0.4%, and MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2% in early trade. It was a cautious but optimistic response from investors in the region to negotiators' assertions that they had settled on a "framework on trade" that they would bring back to their governments.
The U.S. Commerce Secretary, Howard Lutnick, also said the deal could entail removing restrictions on rare earth elements and magnets, but there were no clear details on that. Markets welcomed the news of continuing talks, but traders were skeptical that an agreement, if there was one, would be reached quickly or cover all the contentious issues involved.
Among currencies, the dollar was down 0.1 % against the yen at 144.73. The euro inched up to $1.1433, and the U.S. dollar index was unchanged at 98.971. The action was sluggish and represented a "go nowhere" attitude in the market, particularly as it faced the upcoming U.S. inflation data.
Bond investors were still alert, pushing the U.S. 10-year Treasury yield steady at 4.467%. The market was also eyeing a $39 billion sale of 10-year notes later in the day, a sale that would test international demand as worries grow about the U.S. fiscal stance. Investors have grown skittish about expanding deficits and erratic trade policy, and they have demanded a higher return on even long-term holdings.
Wall Street, meanwhile, finished Tuesday on a high note as major indices rallied on hopes that the trade talks might lead to a positive outcome. Yet European futures were down a little. Futures on EUROSTOXX 50, FTSE, and DAX all fell 0.2%, and S&P 500 and Nasdaq futures were down 0.1%.
Attention will now shift to the U.S. Consumer Price Index (CPI), due later in the day. Economists were expecting a 0.2% rise in headline CPI and a 0.3% uptick in core inflation for May. It's disappointing if inflation only proves decisively that the Fed is unlikely to be ready to cut rates anytime soon. Markets are now pricing in small odds for bill rates at the June and July meetings, but some 60% chance for a cut in September.
In commodities, gold gained 0.3 % to $3,333 an ounce as investors flocked to safety ahead of inflation data. And oil prices pulled back from their most recent highs, with Brent crude losing 31 cents to $66.56 a barrel and U.S. crude easing 28 cents to $64.71.
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