Asian shares ended lower on Monday, Feb. 26, 2024, as investors awaited inflation data from the United States, Japan and Europe that will help refine expectations for future rate moves. The Federal Reserve’s favoured measure of inflation – the core personal consumption expenditures (PCE) price index – is due on Thursday and forecasts are for a rise of 0.4%. Markets have already pushed out the likely timing of a first Fed easing from May to June, which is currently priced at around a 70% probability .
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.3%, having climbed 1.7% last week to seven-month highs. Japan’s Nikkei rose 0.5%, having climbed 1.6% last week to clear its previous record high as bulls look to test the 40,000 barrier. China’s blue-chip CSI300 index fell 0.4%, while Hong Kong’s Hang Seng index dropped 0.6%. Australia’s S&P/ASX 200 index edged down 0.1%, while South Korea’s KOSPI index slipped 0.2% .
The mixed performance by Asian markets was also influenced by the developments in the coronavirus pandemic, which has continued to pose challenges and uncertainties for the global economy. China reported 76 new cases on Sunday, the highest daily rise since January, while Japan extended its state of emergency for some regions until March 7. Australia also reported a small outbreak in Melbourne, prompting a five-day lockdown in the city .
A Profit-Taking Move by Saudi Investors after a Record Rally
Saudi Arabia’s stock market eased on Monday, snapping a 15-day winning streak, as investors booked profits after the index hit a record high last week. The Tadawul All Share Index (TASI) fell 0.2%, after reaching an all-time high of 11,728.13 points on Thursday. The index has gained more than 10% since the start of the year, outperforming most of its regional peers .
The profit-taking move by Saudi investors was also driven by the decline in oil prices, which have been a key factor behind the market’s rally. Brent crude futures fell 34 cents to $81.28 a barrel on Monday, after hitting a three-year high of $82.75 last week. Oil prices have been supported by the OPEC+ group’s decision to maintain its output cuts until April, as well as the geopolitical tensions in the Middle East and the supply disruptions in the United States .
The Saudi market was also affected by the mixed earnings results from some of the leading companies in the kingdom. Al Rajhi Bank, the largest lender by assets, reported a 2.4% increase in its fourth-quarter net profit, but missed analysts’ estimates. Saudi Basic Industries Corp (SABIC), the world’s fourth-biggest petrochemicals firm, posted a 10.8% rise in its quarterly net profit, but also fell short of expectations. On the other hand, Saudi Telecom Co (STC), the largest telecom operator, beat forecasts with a 19.5% jump in its net profit .
A Busy Data Week for the Global Markets
The global markets are bracing for a busy data week, with inflation figures from the United States, Japan and Europe, as well as manufacturing surveys from China and the US. The inflation data will be closely watched by investors, as they will have implications for the monetary policy outlook of the major central banks. The US Federal Reserve, the European Central Bank, and the Bank of Japan have all signaled that they will keep their interest rates low for longer, despite the rising inflation pressures .
The US PCE price index, which is the Fed’s preferred inflation gauge, is expected to show a 0.4% increase in January, lifting the annual rate to 3.5%, the highest since 1991. The Fed has maintained that the inflation surge is transitory and largely driven by supply bottlenecks and base effects, and that it will not rush to tighten its policy until it sees more evidence of a sustained recovery in the labor market .
The euro zone’s consumer price index, which is the ECB’s main inflation measure, is forecast to show a 0.3% rise in January, keeping the annual rate at 2.9%, the highest since 2012. The ECB has also argued that the inflation spike is temporary and that it will not change its ultra-easy policy stance until it sees a durable improvement in the economic outlook .
Japan’s core consumer price index, which excludes fresh food prices, is projected to show a 0.1% decline in January, marking the fourth straight month of deflation. The Bank of Japan has been struggling to achieve its 2% inflation target for years, and has recently hinted that it may revise its policy framework in March to make it more flexible and sustainable .