Asian Stocks on Tight Range Ahead of US CPI Data

Asian stocks were steady on Tuesday as investors approached cautiously ahead of crucial US consumer price index (CPI) data later in the day.

Japanese stocks continued to trade lower and were the biggest underperformers in the region, with the Nikkei 225 index losing 0.52% and the TOPIX dropping 0.99%. The two indexes fell to their lowest in two weeks and now have retreated from last week’s record highs.

The slump came as the country saw its producer price index (PPI) grow to 0.2% month-over-month (MoM) in February.

The reading was slightly above expectations of 0.1%, strengthening the possibility that the Bank of Japan (BOJ) will soon end its yield curve control (YCC) and ultra-dovish policy on sticky inflation and higher wages.

Investors also await wage talks between Japanese companies and major labor unions this week, as any substantial wage surge may support a central bank pivot.

Asian markets received a muted sentiment due to the ongoing doubts over the BOJ’s path and an economic rebound in China.

The blue-chip CSI 300 index shed 0.03% on Tuesday, while the Shanghai Composite index declined 0.47%. Still, the two indexes stayed close to a near four-month peak that had been reached in the previous session.

An uncertain recovery from the world’s second-largest economy has stalled increases in Chinese stock markets.

Hong Kong’s Hang Seng index, on the other hand, gained 1.60%, with tech stocks driving the index, although it was still mostly rangebound.

In broader Asian markets that remained in a tight range, Australia’s S&P/ASX 200 traded 0.04% higher, while South Korea’s KOSPI index advanced 0.39%.

Investors Await US CPI Data for More Cues on Fed Rate Cuts

Investors were wary on Tuesday before the release of the US CPI data, which is expected to provide further cues on the Federal Reserve’s timetable for starting interest rate cuts.

Fed Chair Jerome Powell has stated that inflation was near hitting levels the central bank finds acceptable.

The upcoming reading is expected to show that consumer prices have eased through February, although it is still seen staying above the central bank’s 2% annual inflation target.

The country’s CPI is estimated at a 0.4% MoM rise and a 3.1% year-over-year (YoY) surge. Core inflation is forecast to climb by 0.3% to lower annual growth at 3.7%.

The US inflation is in focus this week, especially after Powell and certain Fed officials suggested that sticky inflation concerns were the central bank’s most significant factor in reducing rates.

While the Fed is not expected to announce interest rate cuts at its meeting next week, the CME FedWatch Tool showed markets are pricing in a 70% likelihood of one in June.