* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei hits a fresh record, S&P 500 futures dip
* Markets await inflation data from US, EU and Japan
* Lots of Fed, ECB speakers on the menu this week
SYDNEY, Feb 26 (Reuters) – Asian shares were taking a
breather near seven-month highs on Monday as investors awaited
inflation data from the United States, Japan and Europe that
will help refine expectations for future rate moves.
The Federal Reserve’s favoured measure of inflation – the
core personal consumption expenditures (PCE) price index – is
due on Thursday and forecasts are for a rise of 0.4%.
It was not long ago investors were hoping for just a 0.2%
increase but high readings on consumer and producer prices
suggest the risk is for a result as high as 0.5%.
Markets have already pushed out the likely timing of a first
Fed easing from May to June, which is currently priced at around
a 70% probability. Futures imply a little more than three
quarter-point cuts this year, compared to five at the start of
the month.
There are at least 10 Fed speakers on the docket this week,
and are likely to repeat their mantra of staying cautious on
rates. The ISM manufacturing survey is due on Friday, as are
PMIs for China.
Despite the hawkish shift, Wall Street still managed to make
new highs helped by huge gains for AI diva Nvidia,
which added $277 billion in market value last week.
“This may be a catalyst not only for the Street to get
materially more bullish on U.S. Equities but also to see a
further decoupling of stocks and yields since the Mag7 are
proving to deliver on earnings expectations irrespective of the
interest rate environment,” wrote analysts at JPMorgan in a
note.
Early Monday, S&P 500 futures and Nasdaq futures
were both trading 0.1% lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan
was little changed, having climbed 1.7% last
week to seven-month highs.
The gains were thanks in large part to a rally in Chinese
stocks, which have jumped almost 10% in as many
sessions on hopes for more aggressive stimulus.
Japan’s Nikkei rose 0.5%, having climbed 1.6% last
week to clear its previous record high as bulls look to test the
40,000 barrier.
INFLATION, ALL THE TIME
Figures on Japanese consumer prices are due out on Tuesday
and are forecast to show core inflation slowed to 1.8% in
January, the lowest since March 2022.
A soft result would add to the case against a tightening
from the Bank of Japan, though policy makers seem to be counting
on rising wages to justify putting an end to negative rates in
either March or April.
Figures on inflation in the European Union are due on
Friday, with the core again seen slowing to the lowest since
early 2022 at 2.9% and bringing nearer the day when the European
Central Bank might ease policy.
Markets are almost fully priced for a first cut in June,
with April seen as a 36% chance.
The head of the ECB Christine Lagarde speaks later on
Monday, as does the chief economist of the Bank of England.
Incidentally, the Reserve Bank of New Zealand (RBNZ) holds
its first policy meeting of the year on Wednesday and there is
some chance it might actually hike rates given stubborn
inflation, even though the country likely slipped into recession
in the fourth quarter.
The shift in Fed pricing saw Treasury yields hit a three
month high last week, though bonds did managed to rally on
Friday. The market faces a tough test later in the session when
Treasury sells $127 billion of two- and five-year notes, with
another $42 billion in seven-year paper due on Tuesday.
There is also a risk some U.S. government agencies could be
shut down if Congress cannot agree on a borrowing extension by
Friday.
In currency markets, higher bond yields globally have been a
burden for the yen which hit multi-month lows on the euro, and a
nine-year trough on the Australian and New Zealand dollars.
Early Monday, the euro sat at 162.80 yen, just
off its peak of 163.45, while the dollar held at 150.50 yen
and just short of its top of 150.88.
The single currency was steady at $1.0820, having
briefly been as high as $1.0889 last week.
In commodity markets, gold was a fraction softer at $2,034
an ounce, having rallied 1.4% last week.
Oil prices have drifted lower as concerns about demand,
particularly from China, have outweighed risks to supply from
the Middle East.
Brent dipped 11 cents to $81.51 a barrel, while U.S.
crude fell 3 cents to $76.46 per barrel.
(Reporting by Wayne Cole;
Editing by Shri Navaratnam)
