U.S. CPI may end up as offering a similarly benign outlook as last week's payrolls, but you wouldn't know it from the timid market action across Asia on Tuesday. FX, bonds and stocks are becalmed in a sea of mediocrity as traders jump at the shadows of what even a mild inflation beat might do. Emerging-market assets in particular may be vulnerable to a surprise uptick.
There are plenty of reasons for an undercurrent of fear, starting with rising credit spreads in the U.S., and beyond. The shift has Mark Cudmore mistrusting the recent S&P 500 rebound. Japan also faces plenty of causes for concern, from the scandal that may cost it its strongest voice at the G-20 next week, to disappointing machine orders. Treasuries meanwhile were looking relaxed as they get used to their new range, while China's bonds are undeterred by inflation prospects. Korean chipmakers should be poised for a breakout, just not on a muddled day such as this one.
European traders may choose to distract themselves from the sullen wait for U.S. CPI by tuning in to U.K. Chancellor Philip Hammond speaking on the economy. Or check out statements from the European Council and European Commission on Brexit. There will also be Spanish inflation data and South African manufacturing to peruse.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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