It was a spritely start to the week across Asian markets, with the major bourses picking up where they left off and the end of the last quarter.
By early afternoon trade, the ASX200, Nikkei, KOSPI and Hang Seng index were all trading in green numbers. A solid lead from Wall Street helped put markets in a good mood.
Meanwhile, there was some mildly positive Chinese data today with the Caixin Manufacturing PMI coming in at 50.5, beating the 50 expected, however it was under the 50.9 previous reading.
So, the good news is that the indicator remained above the key 50 level and was above forecast, but the bad news is it was down from the previous month.
Overall, markets are still crossing their fingers and hoping that the PBOC steps in with more meaningful stimulus measures to sure-up China’s growth prospects.
RBA on the limelight
The RBA meeting awaits and much like was the case in June, July is shaping as a toss-up regarding the decision to hike or pause.
A strong case could be made for both scenarios. A hike could be justified by the fact that inflation remains well above the target band and by pointing to the labour market conditions which remain extremely tight.
Conversely, a fall in the inflation rate from 6.8% (April) to 5.6% (May) could warrant a pause on rates given that CPI has taken a step lowerand would allow more time for the previous tightening steps to take hold before pulling the trigger on another hike.
On balance, a pause seems ever so slightly the more likely outcome this week, but it is very marginal either way.
Elsewhere, a move lower in the US Core PCE Index took some of the steam out of US treasury yields. This move lower in yields has given the gold price a little bit of breathing room.
Meanwhile, a buoyant mood in equity markets and hopes for Chinese stimulus are propping up the oil price.
Oil makes slight gains
Oil made a modest move higher to start the week (during Asian trading hours), with the WTI contract trading at US$70.72.
With supply cuts already factored in, any moves to the upside in oil will likely need to be predicated on an improving global demand picture.
Hence the waiting game regarding more meaningful stimulus measures from Beijing.
Market commentary from Tim Waterer, chief market analyst at KCM Trade.
