Asian markets are poised for a positive open on Thursday after investors interpreted the latest reading of U.S. inflation as confirmation the Federal Reserve will not raise interest rates next week and could extend its pause further.
But although oiland Treasury yields drifted slightly lower, Wall Street’s momentum faded into the market close on Wednesday, leaving investors wondering if the U.S. policy outlook had really become much clearer at all.
The answer is probably not.
The global policy picture, however, could be a lot clearer on Thursday when the European Central Bank delivers its latest rate decision.
Markets are putting a 65% probability on a quarter-point hike, raising their hawkish bets after a Reuters reportthat the central bank expects euro zone inflation to remain above 3% next year.
The Asian and Pacific economic data calendar has a few top-tier releases lined up for Thursday, including Australian unemployment, Japanese machinery orders, Indian wholesale inflation and Indian trade.
Annual wholesale inflation in India is expected to be negative for a fifth straight month but continue moving further away from July’s 4% deflation. Australia’s unemployment rate is expected to hold steady at 3.7%.
In currency markets, a mini divergence between Japan’s yen and China’s yuan appears to be underway. The yen has surrendered most of its gains from hawkish Bank of Japan comments at the weekend and is back in ‘intervention alert’ territory, while the yuan had its strongest close on Wednesday in over a week.
Staying in China, the central bank said it will take the appropriate monetary policy stance to raise demand and prices in the economy, and investors will also be keeping tabs on U.S.-China divisions, the latest manifestation of which is the spat over iPhones.
The White House said on Wednesday it is watching apparent bans on some Chinese government official use of Apple iPhones with “concern,” adding it appeared to be aggressive and inappropriate retaliation.
For its part, Beijing insists there is no ban on the purchase and use of foreign phone brands.
But China might have another front opening up in its trade and diplomatic wars, after the European Commission on Wednesday launched an investigation into whether to impose punitive tariffs to protect EU producers against cheaper Chinese electric vehicle imports it says are benefiting from state subsidies.
Here are key developments that could provide more direction to markets on Thursday:
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