Asian markets were mixed Monday, as traders struggled to sustain a morning rally after Wall Street set a new high, while oil prices fell on reports of progress in relocating a container ship clogging the Suez Canal.
A lower-than-anticipated reading on US prices on Friday provided support, easing worries that inflation triggered by an expected strong global recovery would push central banks to tighten their ultra-easy monetary policies or increase interest rates.
The publication of key US employment data for March, as well as statistics on manufacturing activity around the world, will provide plenty of food for thought for traders in the coming week. President Biden is expected to announce the next phase of his economic recovery strategy, which will focus on infrastructure.
According to some estimates, the total cost of the project may be about 3 trillion dollars. That comes when his newly enacted 1.9 trillion stimulus package starts to take effect, which is causing some concern because the bill will almost certainly be paid for by higher taxes, and there is also concern that it will contribute to price pressure.
“Inflation remains a persistent problem for investors,” according to John Bilton of JP Morgan Asset Management. In the second and third quarters, we expect headline inflation to be unpredictable, with the risk of sticker shock as annualised base effects produce optically elevated year-on-year readings.
However, we assume that many of the secular disinflationary forces globalisation, technological adoption, and so on continue to anchor core inflation, so inflation rates should remain controlled in 2021 even if significant policy stimulus is introduced. The day at all-time highs, suggesting that Wall Street’s three key indexes finished the day strongly.
Tokyo, Shanghai, Singapore, Taipei, Manila, Bangkok, and Wellington all rose in Asia, while Hong Kong, Seoul, and Jakarta reversed morning gains to trade lower. Sydney was also weighed down by the news that Brisbane had been put on a three-day lockout. London scarcely advanced in the first few minutes, while Paris and Frankfurt crept forward.
Optimism was boosted by the progress of vaccine rollouts in the United States and the United Kingdom, where infection rates are slowing and officials are relaxing some lockdown measures. Amid the continent’s stuttering inoculation campaign and increasing infections, European markets were buoyant, thanks to some forecast-beating economic results.
The data releases this week, according to Axi strategist Stephen Innes, will be critical in driving more gains. “Seeing how much hope is built into the economic reopening narrative,” he wrote in a note, “it’s vital that this week’s financial results, at the very least, meets expectations to keep this ship on a level keel.”
After salvage teams were reported to have partially moved a megaship that had been blocking the Suez Canal for nearly a week, both major oil contracts fell more than 2%. The Ever Provided was refloated early this morning, according to a tweet from maritime services provider Inchcape, reopening one of the world’s most significant trade and crude shipments routes.
The vessel’s owners told AFP that it had “turned” but had not yet been refloated. Nonetheless, Osama Rabie, the head of the Suez Canal Authority, said that the reflating process had begun “successfully.”
