Asian equities rose cautiously on Monday as US stock futures posted early gains, although investors were wary of bearish surprises in a series of Chinese economic data to come out later.
Annual growth in retail sales, industrial production and urban investment is expected to slow further in October, partly due to pandemic restrictions and tensions in the real estate market.
Commonwealth Bank of Australia economists argued that there was a chance the People’s Bank of China would cut bank reserve requirements (RRR) this week to support activity.
“We estimate that a 50 basis point cut in RRR could free up CNY 1 billion of cash,” they said in a statement. “In our view, moderate easing measures can help meet funding requirements for real estate developers and offset downside risks to the economy.”
Elsewhere, the United Nations climate conference in Scotland managed to strike a deal on emissions, but only by watering down the commitment to phase out coal.
The broader index of Asia Pacific stocks outside Japan of US financial company MSCI rose 0.1 percent after rising late last week.
Japan’s Nikkei gained 0.7 percent as data showing economic activity shrank more than expected in the third quarter only reinforced the reasons for aggressive fiscal stimulus.
Wall Street slowed last week to break through a string of gains, even though the major indices were only a shadow from their all-time highs. S&P 500 futures stabilized at 0.2 percent in early trading Monday, while Nasdaq futures gained 0.3 percent.
A key release to watch this week will be Tuesday’s U.S. retail sales for any effect from the decline in consumer confidence to the 10-year low reported in November as people worried about higher prices. especially for petrol.
There are also doubts as to whether firms have the pricing power to maintain margins in the face of rising costs.
Analysts at Bank of America (BofA) noted that 75% of US companies exceeded earnings estimates in the last reporting season, but forecasts for the fourth quarter were only flat, shattering over a year of rising expectations. .
The gloomy poll helped Treasuries stabilize somewhat, but yields still rose an impressive 11 basis points for the week as the market priced in greater risk of an anticipated Federal Reserve tightening.
BofA economist Ethan Harris suspects the market has not yet priced enough, as the initial high level of inflation means rates need to rise more to reach neutrality.
“If inflation remains high and exceeds its expected breach, the Fed will have to become much more aggressive and either accept a market correction or induce it deliberately,” Harris warns.
The higher US yields combined with general risk aversion in favor of the dollar, which boasted its best week in nearly three months. Against a basket of currencies, the dollar was stuck at 95.120, just off its high since July 2020.
It was holding at 113.99 yen, preparing for another challenge from the October high at 114.69.
The euro looked vulnerable at $ 1.1442, after falling significantly lower last week.
“Covid infection curves moving in the wrong direction are part of the reason as new restrictions are being imposed in Austria and the Netherlands,” said Ray Attrill, head of FX strategy at National Australia Bank.
“The implications or both growth and policy of the ECB are not being lost on the currency markets.”
European Central Bank President Christine Lagarde will appear before the European Parliament on Monday.
Inflation concerns kept gold demand at $ 1,865 an ounce after posting its largest weekly gain since May.
Oil prices had a tougher week, hit by a strengthening dollar and speculation that President Joe Biden’s administration might release oil from the US Strategic Petroleum Reserve.
Earlier on Monday, Brent bounced 21 cents to $ 82.38 a barrel, while US crude oil gained 28 cents to $ 81.07.