HONG KONG – Asian investors today struggled to build on last week’s gains as profit-takers stepped in while awaiting the next buying catalyst, with eyes on the upcoming release of key United States jobs data.
Despite worries that the expected surge in economic activity this year will send prices soaring and force central banks to tighten monetary policy, a forecast-beating jump in a closely watched US inflation gauge was taken in stride.
The calm reaction marks a change from recent times, with benchmark 10-year Treasury yields, a key gauge of future interest rates, inching down slightly.
“There is likely more upside to go on the inflation scare front in the months ahead as base effects, the lagged impact of commodity price hikes, and bottlenecks continue to feed through, but there are now a few more signs that it will be transitory,” said AMP Capital’s Shane Oliver.
All three main US indices ended Friday with small gains, though Asia fluctuated.
Tokyo, Hong Kong, Shanghai, Sydney, Singapore and Manila dipped, but there were gains in Seoul, Taipei, Jakarta and Wellington.
There was little reaction to figures indicating growth in China’s factor activity slowed slightly this month.
Focus is now on the release of US jobs figures this week, which will provide a fresh update on the state of the world’s top economy as it emerges from last year’s Covid-19 pandemic-induced collapse.
Patrik Schowitz of JP Morgan Asset Management said: “It still feels like a market looking for direction in the face of uncertainty around the interplay between much-feared inflation and much-hoped-for growth recovery.
“There still seems (to be) an extended growth runway ahead, as further regions around the globe get the Covid-19 vaccination situation under control – nothing we’re seeing is really challenging that expectation, although it will take time, especially across some of the major emerging market economies.”
Oil prices edged up and are approaching levels not seen since January last year before the pandemic hammered demand. Crude traders are also keeping tabs on a meeting of the Organisation of the Petroleum Exporting Countries and other major producers tomorrow, where they will decide on whether to lift output as the world economy bounces back.
They will also look for any comments on the prospect of Iranian oil returning to the market if Tehran reaches a new nuclear agreement with global powers. – AFP, May 31, 2021
