Asian shares edged cautiously higher on Monday catching the tailwind from a bounce on Wall Street and ahead of what are expected to be upbeat readings on the Chinese economy, though any disappointment could quickly chill the mood.
Industrial output and retail sales are forecast to show hefty annual gains given activity in April last year was badly marred by pandemic lockdowns. Exports remain strong as the developed world reopens, while stimulus at home should support retail spending.
MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 0.2%, nudging further away from a four-month trough hit last week.
Japan’s Nikkei gained 0.4%, having also touched its lowest since early January last week.
S&P 500 futures and Nasdaq futures were both flat, following Friday’s rally.
The U.S. data calendar is light this week, putting the focus on minutes of the Federal Reserve’s last policy meeting for any clue when officials there might start to talk about tapering.
So far, most Fed members have been doggedly dovish on policy, arguing a spike in inflation was transitory, though there was a risk it could get baked into expectations.
The University of Michigan consumer survey last week showed the highest expected year-ahead inflation rate as well as the highest long-term inflation rate in the past decade.
BofA’s U.S. economist Michelle Meyer sees outsized price pressures from shortages of goods and rebounds in travel.
“Inventory-to-sales ratios are at historic lows, record numbers of small businesses complain of tight inventories, ports are congested, and shortages of semiconductor chips and new/used cars are driving prices higher,” Meyer says.
“We expect goods inflation to soften by year end as demand levels off and production rebounds, but wages may continue to climb,” she added.
The inflation scare initially saw 10-year Treasury yields reach a six-week peak just above 1.70%, but the Fed’s patience soothed the mood and yields were back to 1.63% on Monday.
The dollar pretty much tracked the move in yields, bouncing to 90.909 on a basket of currencies before fading away to its current 90.294.
The euro was last at $ 1.2148, having climbed 0.5% on Friday as yields eased, while the dollar was steady on the yen at 109.37.
Bitcoin fell 12% to its lowest since February after tweets from Elon Musk hinted that Tesla may have sold, or will sell, its holdings.
The dip in the dollar combined with inflation concerns on Monday to lift gold to a three-month top at $ 1,847 an ounce and cracking tough resistance at $ 1,845.
Oil prices edged higher after see sawing last week as the Colonial Pipeline restarted from a hacker shutdown.
Brent added 22 cents in early trade to $ 68.93 a barrel, while U.S. crude rose 19 cents to $ 65.56 per barrel.