|Inflation slowdown could crimp Fed’s tightening plans, Merkel hails India as a “reliable partner,” and bitcoin bubble might be bursting. Here are some of the things people in markets are talking about.|
|June? Yes. September? Less Likely.
The Fed’s preferred gauge of price pressures decelerated to an annual pace of 1.5percent in April, leaving the risks to the central bank’s year-end forecast for inflation tilted to the downside. Speaking Tuesday, Federal Reserve Governor Lael Brainard said that persistently soft inflation would cause her to “reassess the appropriate path of policy.” Market-implied odds suggest that a rate hike in June is a likely event, but traders have also cooled to the notion of another increase in September.
G-7 Fallout Ripples
The world order that’s persisted since WWII has shown signs of fraying, prompting new geopolitical alliances to be contemplated. To this end, India’s ties with Europe appear to be on a firmer footing. Prime Minister Narendra Modi and Chancellor Angela Merkel met in Berlin, with the German leader calling India “a reliable partner,” in stark contrast to comments she directed toward the U.S. this weekend after the G-7 summit, expressing doubt in transatlantic alliances. U.S. President Donald Trump had blasted Germany for its failure to spend a sufficient amount on collective defense as part of NATO as well as its massive trade surplus.
Bitcoin has slumped roughly 20 percent after hitting all-time highs last week. This could be the beginning of the end for the cryptocurrency bubble—or a brief pause in the rally that’s seen it rise more than 130 percent so far this year. Turning to more conventional assets, U.S. stocks fell from all-time highs with a modest decline Tuesday to snap a seven-session winning streak. U.S. Treasuries gained while the dollar dipped.
S&P/ASX 200 and Nikkei 225 equity futures are slightly in the red as of 5:30 a.m.Tokyo time, with strength in the Japanese yen weighing on the latter. On Tuesday, stocks in the region bounced back from the prior session’s retreat with the MSCI Asia Pacific Index inching 0.1 percent higher on relatively weak volumes. Hong Kong and Chinese equity markets were closed for holidays Tuesday.
The top event on the Asia Pacific economic calendar on Wednesday will be the release of China’s official manufacturing and non-manufacturing purchasing managers’ indexes, due out at 10 a.m. Tokyo time. The former is expected to moderate slightly to 51 in May from 51.2, suggesting the sector’s rate of growth decelerated. Data out of Japan include the preliminary reading of industrial production in April, expected to quicken to an annual increase of 6.1 percent from 3.5 percent, as well as housing starts for the month, estimated to dip to an annualized pace of 970,000. Also on deck: Australia’s private sector credit growth, forecast to moderate by a tick to 4.9 percent year-on-year in April, and South Korean business surveys on the nation’s manufacturing and non-manufacturing sectors. Meanwhile, India’s first-quarter GDP is slated for release at 9 p.m. Tokyo time, and is forecast to accelerate to an annual pace of 7.1 percent from 7 percent to end 2016.
Sent by Bloomberg