U.S. inflation day

A look at the day ahead in Asian markets from Jamie McGeever

Investors get the latest U.S. inflation figures on Tuesday, which will set the seal – or not – on a third consecutive 75 basis point rate hike from the Fed, and set the tone for global markets for the next several weeks.

Headline annual consumer inflation is expected to have slowed in August to 8.1% from 8.5%, and on a monthly basis, prices are expected to have fallen outright by 0.1%. Core inflation is expected to be a little stickier.

But that was the consensus forecast before the New York Fed’s latest survey of consumers’ inflation expectations was released on Monday. It showed a pretty steep decline in inflation expectations, particularly the one-year ahead outlook.

It is another piece of evidence that suggests the inflation peak is firmly in the rear-view mirror. Shipping rates, oil, lumber, and a whole host of other commodities prices have fallen substantially in recent months.

Asian stocks are likely to open in the green on Tuesday after Wall Street once again climbed higher. That was despite a rise in longer-dated bond yields following a weak 10-year Treasury auction, and a spike in the ‘VIX’ volatility index.

Some of the equity market optimism is down to news that Ukrainian forces had advanced against Russia in a war that has hurt the global economy. Some of it is down to the easing of financial conditions brought on by the falling dollar.

The dollar has weakened for four days in a row, and on Monday posted its biggest one-day decline in a month.

Elsewhere in currencies, meanwhile, Japan’s central bank is nowhere near close to trying to support the yen with higher interest rates, three sources familiar with the thinking of the Bank of Japan said.

Key developments that should provide more direction to markets on Tuesday:

Japan business survey index ((Q3)

Australia consumer sentiment, business confidence (August)

U.S. inflation (August)