Asian Markets Rally Amid CPI Countdown

The latest Consumer Price Index (CPI) numbers’ release is expected today, 10 October, and ripples are being felt across the globe in anticipation. Let’s look at how Asian indices are reacting and what experts foresee for the Fed’s favoured inflation measure:

Chinese Stocks Jump

Asian stock markets saw notable gains on 10 October, with China leading the way following the release of detailed stimulus measures aimed at supporting the domestic economy. This provided a boost to mainland Chinese shares, which had previously experienced some losses. The China A50 Index gained over 2%, while Hong Kong's Hang Seng (Hong Kong 50) surged by 3%, reflecting a broad-based recovery across Chinese equities. Investors are closely watching these developments, with expectations of further fiscal stimulus.

Further east, Japan’s Nikkei 225 (Japan 225) posted modest gains of slightly under 0.3%. As global markets await further indication of how key macroeconomic factors will play out, from central bank decisions and potential earnings reports, Asian indices are riding the momentum of China’s stimulus optimism and the evolving outlook for inflation in the U.S.

Markets across the region were influenced by anticipation of U.S. inflation data, which could shape the Federal Reserve’s next moves. With the Fed’s policy outlook in focus, investors are waiting to see whether inflationary pressures have weakened enough to warrant an easing of monetary policy. (Source: Yahoo Finance)

Countdown to CPI

Scheduled for release at 8:30 a.m. ET on Thursday, the latest crucial CPI data is anticipated to show a headline inflation rate of 2.3%, a slight decline from August's 2.5% year-over-year increase. This would mark the lowest inflation rate since early 2021, soon after the COVID-19 pandemic’s beginning. On a monthly basis, consumer prices are expected to have risen by 0.1%, a slower pace than August's 0.2% increase.

Core inflation, which excludes volatile food and energy prices, is forecasted to remain steady at 3.2% on an annual basis. Monthly core inflation is predicted to slow slightly, with a 0.2% rise compared to the 0.3% increase recorded in August. Despite this moderation, inflation remains above the Fed’s long-term target of 2%, which keeps the central bank’s monetary policy closely tied to inflation dynamics.

However, the Federal Reserve has increasingly focused on the labour market, which continues to show unexpected strength despite elevated interest rates. This latest, more robust labour data has tempered expectations for aggressive rate cuts, with markets now anticipating a smaller 0.25% cut in November, rather than the larger 0.5% reduction some had previously predicted.

While inflation has shown signs of cooling, core inflation remains sticky due to rising costs in shelter and services. Potential risks of stronger inflation in housing-related costs and services have been noted, which could lead to firmer core CPI readings. This creates some uncertainty about the pace of the disinflationary trend, particularly if other factors, like rising oil (CL) prices amid geopolitical tensions, start to weigh on the economy. (Source: Yahoo Finance)

Conclusion

All in all, while Asian markets are buoyed by China's stimulus measures, global attention is already shifting to the upcoming U.S. inflation data release and its implications. The combination of inflationary pressures and resilient labour markets is keeping investors on edge, anticipating the next macroeconomic moves. Following today’s CPI release, traders may soon be able to get a better grasp on where American monetary policies as well as other key factors will go.

Past performance does not indicate the nature of future results. Financial projections are for illustrative purposes only and therefore cannot be relied upon.