Stocks attempt a bounce, bonds fret on US inflation
![Stocks attempt a bounce, bonds fret on US inflation](https://92newshd.tv/wp-content/uploads/2017/12/asian-stock.jpg)
SYDNEY (Reuters) - Asian share markets found a semblance of calm on Monday as S&P futures extended their bounce, though bond investors were still fretting about the risks from looming US inflation data.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.8 percent, having suffered a 7.3 percent drubbing last week.
Both South Korea and China gained 0.8 percent, while Japan’s Nikkei was closed for a holiday.
E-Mini futures for the S&P 500 rose 0.5 percent, adding to a late bounce on Friday. Yet a relatively sharp 12 tick drop in Treasury bond futures suggested it was too early to sound an all-clear on volatility.
“A massive buildup in market leverage has been partially unwound in the blink of an eye and morphed into something far more broad-based,” said Chris Weston, chief market strategist at broker IG.
“One could argue that it is the US bond market that is the driving force, and will remain so through this coming week.”
Particularly challenging will be US consumer price data on Wednesday given it was fears of faster inflation, and thus more aggressive rate rises, that triggered the global rout in the first place.
Median forecasts are for consumer price inflation to slow a little to 1.9 percent in January, mainly due to the base effect of a high reading in January 2017, while the core measure is seen ticking down to 1.7 percent.
A result in line with or below expectations would likely be a big relief, while anything higher could well spook investors, lift bond yields and batter stocks.
Aziz Sunderji, an economist at Barclays, suspects the inflation scare will prove to be transitory.
“Tight jobs markets will pressure wages upwards, but technology, automation, and globalisation are important – and slow moving – forces acting in the opposite direction,” Sunderji argued in a note to clients.
“Paradigms don’t shift on a dime. In our view, the recent market turmoil is a bump in the road, not a wholesale change of direction.”