Stock Market

Marketmind: Asia Keeps Riding High on U.S. Inflation Relief

Let’s take a peek at what lies ahead for European and global markets, brought to you by Sonali Desai.

Thursday’s market scene was just right, like Goldilocks herself—a cool-down in U.S. inflation combined with a sizzling job market, spreading warmth throughout the financial landscape. Stocks in Asia are riding the rally wave, while declining global yields are prompting a further unwind of yen carry trades.

The Asia-Pacific shares index, as per MSCI, is setting its sights on a remarkable week, marking its best performance in 2023. Meanwhile, the yen is gearing up for its most significant weekly gain against the dollar since January.

Remarkably, interest rate differentials are now favoring the Japanese currency, with 10-year U.S. Treasury yields stuck at a one-month low, while Japanese government bond yields reach a four-month high of 0.485%. They inch ever closer to the Bank of Japan’s implicit ceiling of 0.50%.

The dollar finds itself on the back foot as a result, facing off against another currency facing its own set of challenges—the Chinese yuan. The People’s Bank of China has expressed some spirited opinions on the matter.

Shifting our focus to Asia, the Reserve Bank of Australia took center stage with its highly anticipated announcement of the next governor. While the appointment of Deputy Governor Michele Bullock as the central bank’s new leader grabbed attention, the Australian dollar and bond yields barely flinched. This was widely seen as a sign of evolution rather than revolution in policymaking.

As for the rest of the day, economic data takes a backseat. We’ll see the release of euro zone trade figures, U.S. export and import prices, and the University of Michigan consumer sentiment report, which will be the main highlights.

But buckle up, folks, because it’s a big day for bank earnings. JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and BlackRock (NYSE:BLK) are all set to reveal their second-quarter results.

Another event that’s sure to captivate a wider audience is the highly anticipated strike by Hollywood actors, joining forces with film and television writers. Brace yourselves for a potentially lean fall viewing season.

Now, let’s shift our attention to key developments that could sway the markets on Friday:

Euro zone trade data will be in the spotlight.

European Central Bank Vice-President Luis de Guindos is making his presence felt at the ECOFIN meeting in Brussels.

Keep an eye out for U.S. export and import prices, University of Michigan consumer sentiment, and inflation expectations.

Last but not least, we eagerly await the earnings reports from JPMorgan Chase, Citigroup, Wells Fargo, and BlackRock.

It’s an exciting time in the market, so buckle up and enjoy the ride!

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