Market Close Mar 15

Risk market stabilises on manageable inflation comment 

China underperforms on tightening bias fears; Crypto hit by India ban report; US Treasuries stabilise ahead of Fed 

Risk market stabilises on manageable inflation comment 
The US Treasury Secretary said the risk of inflation this year was 'small' and 'manageable'.

HONG KONG: Asian markets were broadly higher on the confidence that while inflation was a significant economic risk, it was manageable.

China’s markets underperformed as investors worried Beijing was turning hawkish on asset bubbles and could shift its monetary bias to cap risky asset valuations.

Japan’s Nikkei 225 index edged up 0.17%, Australia’s S&P ASX 200 was flat, Hong Kong’s Hang Seng index added 0.33% and China’s CSI300 slipped 2.15%. Regionally, the MSCI Asia Pacific index advanced 0.65%.

Read more: Chinese garment factories burnt down in Yangon

“Policy makers are closely watching for local asset bubbles – so robust activity data [alongside high commodity prices and rising PPI inflation] could ironically lead to aversion to easing or bias to tightening. This is negative for some overvalued risky assets,” said Ju Wang, HSBC’s Senior FX Strategist.

This followed China’s data release during the day that showed factory and retail sector activity surged in the first two months of the year, beating expectations.

The US dollar firmed 0.1% up at 91.74 and US Treasuries firmed on expectations inflation risks were under control. 

“Is there a risk of inflation? I think there’s a small risk and I think it’s manageable,” US Treasury Secretary Janet Yellen said on ABC’s This Week on Sunday.

BITCOIN DROP

Bitcoin fell 1.6% from a record high after Reuters reported that India would propose a law banning cryptocurrencies. The new bill proposes to criminalise possession, issuance, mining, trading and transferring crypto-assets, a senior government official said.

Reflecting the economic optimism, oil prices rose – West Texas Intermediate crude gained 0.3% to $65.81 a barrel and Brent crude increased 0.3% to $69.42 a barrel.

“Wall Street continues to upgrade the US consumer spending outlook, which is favourable for oil prices too. Still, oil is showing signs of consolidation after a supercharged multi-month rally,” said Stephen Innes, Chief Global Market Strategist at Axi while adding dip-buying emerged ahead of the widely expected US economic forecast upgrade by the US Fed this week at the Wednesday-rate decision.

RATE HIKES

While Federal Reserve Chair Jerome Powell has reiterated the stance of remaining resolutely supportive for growth, the challenge will be in convincing markets that inflation risks can be overlooked and rate hikes remain years away.

“Any changes to the official monetary policy statement, as well as the general tone of Fed Governor Jerome Powell’s press conference, could provide insight on the Fed’s plans moving forward,” said Matt Weller, Global Head of Market Research at GAIN Capital.

“Expect media members to grill Powell on the definition of ‘substantial progress’ toward the central bank’s employment and price stability goals in an attempt to glean insight into when bond purchases could cease and interest rates could rise.”

Asia Stocks

  • Japan’s Nikkei 225 index edged up 0.17%
  • Australia’s S&P ASX 200 was flat 
  • Hong Kong’s Hang Seng index added 0.33%
  • China’s CSI300 slipped 2.15%
  • The MSCI Asia Pacific index advanced 0.65%.

Stock of the day

Xiaomi Corpn. Shares rose as much as 12.1% after a US court removed the restriction on US persons to purchase securities of the company and the requirement on US persons to divest their holdings. It was the most second most heavily traded stock on the HKEX.

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