Ahead Today
G3: US ISM Manufacturing Survey, US ISM Manufacturing Prices Paid
Asia: China Manufacturing and Non-Manufacturing PMIs
Market Highlights
US PCE inflation was in line with expectations, with the core measure in particular rising 0.4% mom sa. The details showed that services components such as health care, financial services, and accommodation adding to a meaningful pickup in inflation during the month. On the US inflation front as well, there is currently some confusion in the market around the January price spike in the “owner’s equivalent rent” category, which was attributed by the BLS to an increase in weightings to single-family homes. This could be important for markets moving forward depending on the January rent inflation spike resolves in coming months.
Meanwhile, Bank of Japan Board Member Hajime Takata sent a strong signal that the case for ending negative interest rate is gaining momentum, saying that the “price target is finally coming into sight”, and that Japan is “at a juncture for a shift in the entrenched belief that wages and inflation won’t rise”.
We saw a relief rally in equity markets with S&P500 up 0.5%, some declines in US Treasury yields, and with USDJPY breaking below 150 levels briefly on the back of BOJ’s comments.
Regional FX
Asian FX markets traded slightly weaker against the Dollar, with IDR (-0.48%), PHP (-0.2%), and THB (-0.14%) underperforming. In Asia, markets are watching closely at China’s manufacturing and non-manufacturing PMIs out later today, together with growth targets and possible policy direction during the National People’s Congress from 5 March. We had exports and industrial production data out of several Asian countries, the bulk of which pointed to gradual recovery in the goods and manufacturing sector, and especially for those linked to the AI semiconductor chip boom. For instance, Taiwan’s industrial production rose more than expected by 16%yoy, while South Korea’s exports rose 4.8%yoy (vs consensus for a 1.4%yoy rise). Meanwhile, India’s 4Q GDP was stronger than expected at 8.4%yoy, up from 7.6%yoy the previous quarter. We continue to hold a constructive view on INR, with bond index inclusion flows, robust growth, and rising FDI likely to support currency moving forward
