Asian shares edged up on Monday as investors braced for a busy week of economic data, culminating in a crucial U.S. inflation report that could influence future interest rate cuts, albeit not immediately. The thin trading was attributed to holidays in the United States and the United Kingdom.
The spotlight is on Friday’s figures for core personal consumption expenditures (PCE), the Federal Reserve’s preferred measure of inflation. Analysts forecast a 0.3% rise in April, maintaining an annual pace of 2.8%, with some downside risks.
“Consumer and producer price data suggest core PCE inflation lost further momentum in April after a strong start to the year,” noted analysts at TD Securities. They predict a 0.22% month-on-month increase for the core index, compared to March’s 0.32%.
In addition to the U.S. data, inflation figures from the eurozone are also anticipated on Friday, with an expected rise to 2.5%. This is unlikely to prevent the European Central Bank (ECB) from easing policy next week. ECB policymakers Piero Cipollone and Fabio Panetta hinted at a possible rate cut over the weekend, with markets showing an 88% chance of easing to 3.75% on June 6.
The Bank of Canada might also cut rates next week, while the Federal Reserve is expected to wait until September for its first rate cut. At least eight Federal Reserve officials are scheduled to speak this week, including the influential New York Fed President John Williams.
Japan’s Nikkei rose 0.3% ahead of the Tokyo consumer prices reading later in the week. Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan firmed by 0.1%, recovering from last week’s 1.5% drop.
In the U.S., S&P 500 futures remained flat, while Nasdaq futures dipped 0.1%, despite hitting record highs last week following Nvidia’s impressive earnings report. Nvidia has contributed significantly to the S&P 500’s gains this year, alongside the ‘Magnificent 7’ tech giants, which are up 24% for the year.
In the currency markets, the yen remained a focal point as Japan renewed efforts to counter excessive falls. The dollar stood at 156.89 yen, near its recent peak of 160.245. The euro held steady at $1.0845, just short of its recent high of $1.0895.
Gold prices remained at $2,337 an ounce after dropping 3.4% last week, falling from a record high of $2,449.89. Oil prices hovered near four-month lows amid demand concerns as the U.S. driving season begins. Brent crude was up 5 cents at $82.17 a barrel, while U.S. crude rose 9 cents to $77.81 per barrel.
Investors are awaiting the outcome of the OPEC+ meeting on June 2, with speculation over potential production cuts, though analysts doubt a consensus will be reached.
As markets navigate this critical week, all eyes will be on the upcoming inflation data and the subsequent policy responses from central banks around the globe.