- Asian traders remain cautious after China’s factory-gate inflation joins recent disappointing data.
- The US-China trade optimism prevails while expectations of German and European stimulus play their role.
While optimism surrounding the US-China trade deal and increasing odds of Germany’s fiscal stimulus, coupled with ECB’s extra-loose monetary policy, favored the Asian traders during early hours, China’s downbeat factory-gate inflation, Producer Price Index (PPI), warned the bulls ahead of the European session opening on Tuesday.
As a result, MSCI’s index of Asia-Pacific shares outside Japan remains close to 0.10% loss while Japan’s NIKKEI shows +0.28% profits.
Following news of the current month visit by Chinese Deputies shared by the White House Economic Adviser, the US President Donald Trump said that they will talk trade with China during next week. Additionally, the Treasury Secretary Steve Mnuchin gave details while showing readiness to discuss currencies while meeting Chinese delegation.
Given the progress of the much-awaited US-China trade meeting, investors bought the calls that the world’s two largest economies will overcome the fierce trade war that has been weighing over the global economy. In its recent report, Fitch downgraded growth forecasts for China, the US and the EU considering trade war as one of the major economic threat.
Also supporting the equity traders’ optimism is expectations of Germany’s fiscal stimulus and the European Central Bank’s (ECB) additional support for easy monetary policy during the last meetings of Mario Draghi as the central bank’s President.
Moving on, better than forecast prints of China’s August month inflation data, namely the Consumer Price Index (CPI) and PPI, couldn’t avoid fears of weakness in the second-largest economy. While the CPI rose beyond 2.6% to match 2.8% prior, PPI slumped -0.8% from -0.3% earlier. With this, China’s HANG SENG remains mostly stable with no major gain/loss while Australia’s ASX 200 and New Zealand’s NZX 50 are nearly 1% in loss.
Elsewhere, British parliaments’ prorogation and the US and the UK’s tussle with the Arab world question investor sentiment.
Even so, the macro risk barometer, the US 10-year treasury yield, remains positive around 1.65% by the press time.
Given the lack of major data, except the UK employment statistics, markets will keep following trade/political headlines for fresh direction.
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