Expectations are for CPI to come slightly above June’s reading, but analysts warned investors were walking a fine line with a forecast-topping print likely to dent rate cut hopes and a too-weak read stoking economic fears.
“I’d imagine, for equities at least, given the comfort blanket that the surge in September cut expectations has provided recently, that a hotter-than-expected figure could see some fairly sizeable downside,” said Pepperstone’s Michael Brown.
While there have been warnings that the tariffs will stoke inflation, National Australia Bank’s Ray Attrill said: “The larger tariff impacts … probably will not be felt until August or September, with firms now only gaining some clarity on the degree of reciprocal tariffs.
“The current profit reporting season has noted firms on the whole were waiting for greater clarity on final tariff rates before adjusting prices.”
Also on the agenda this week are wholesale prices and retail sales, with the Fed’s favoured gauge of inflation at the end of the month. Bank officials are then set to make their decision in the middle of September.
Forecasts are for a reduction at that gathering and one more before the end of the year.
Asia’s markets rally was led by Tokyo’s Nikkei 225, which briefly soared almost three per cent to hit a record high of 42,999.71 on renewed optimism over the Japanese economy after officials reached a deal to avert the worst of Trump’s tariffs.
IwaiCosmo Securities said in a market commentary that “easing tensions over US-China trade talks, as well as speculation about the US’s imminent lowering of (interest) rates” had helped boost investors’ hopes about the recovery of Japanese companies.
The gains came as traders returned to work after a long weekend.
Hong Kong, Shanghai, Taipei, Mumbai, Jakarta and Manila also advanced with London, Paris and Frankfurt.
Sydney was also given a lift by news that the Australian central bank had cut interest rates.
Seoul, Singapore and Wellington dropped.
Source: CNA
