Lingering concern over China’s slide into deflation and caution ahead of U.S. inflation data will keep markets in check on Thursday, as investors also eye India’s interest rate decision, wholesale inflation from Japan and Philippine GDP data.
Renewed tension between the United States and China could be back on investors’ radar, with the White House detailing plans to prohibit some U.S. investments in Chinese technology, and requiring that the government be notified of other investments.
Although Chinese stocks fell for a third day on Wednesday the rest of Asia shrugged off the Chinese deflation figures, and the MSCI Asia ex-Japan index rose 0.5% for its best performance so far this month.
Perhaps there was some relief that the -0.3% annual rate of deflation was not quite as bad as the -0.4% economists had expected – it was certainly enough to lift China’s economic surprises index to its highest since June 26.
In the same vein, a more benign reading of U.S. inflation on Thursday than consensus estimates could lift some of the gloom that has descended on markets since Fitch stripped the United States of its triple-A credit rating on Aug. 1.
