This week ahead || Mar 11th

Accentuating the positive at the BOJ

In Japan, revisions to economic growth data for the fourth quarter have shifted sentiment, with growth now at +0.1% q/q instead of a previously reported contraction, suggesting stabilization and encouraging talk of the Bank of Japan (BOJ) normalizing rates. Reuters sources indicate policymakers may consider ending negative interest rates this month, with futures implying a 53% chance of a rate shift to zero at the BOJ's March meeting. Refining yield curve control is also discussed to gradually guide yields higher. Rising JGB yields could impact Japanese investors' offshore investments and affect the yen carry trade, though the BOJ's commitment to a zero rate environment tempers concerns. Meanwhile, in the U.S., all eyes are on Tuesday's CPI report, with forecasts of a 0.4% monthly rise and stable annual pace at 3.1%, potentially influencing the Fed's rate-cutting trajectory amidst softer core inflation and employment conditions.

Morning Bid: Accentuating the positive at the BOJ

Revisions now put economic growth at +0.1% q/q in the fourth quarter, instead of -0.1%, so nullifying all the media lamentation about Japan’s contraction. When it comes to about $4 trillion of annual GDP such a small revision is just statistical noise, but it fit the narrative of stabilisation that is encouraging the Bank of Japan to contemplate the end of negative interest rates. Four sources tell Reuters a growing number of policymakers are warming to the idea of normalising rates this month on expectations of hefty pay hikes in this year’s annual wage negotiations.

Yahoo FinanceWayne Cole

Are China's inflation, capital flows tides turning?

In Asian markets on Monday, signs of fatigue from Wall Street and mixed Chinese inflation data will shape sentiment. Expectations of a potential policy change from the Bank of Japan later this month could drive the Nikkei and yen. China's inflation data revealed higher-than-expected consumer price inflation, signaling a potential shift away from deflation, but producer prices continued to decline. Concerns persist over U.S.-China trade tensions, with reports of possible sanctions on Chinese tech firms. Despite capital outflows, China saw its first equity inflow in six months in February. Trading in the Japanese yen intensifies as speculation mounts regarding the BOJ's policy meeting. The yen saw its best week against the dollar since July, with expectations of Fed rate cuts in June. With mixed signals globally, including potential rate cuts in the U.S. and euro zone, alongside signs of a slowdown in the Wall Street rally, market sentiment remains cautious.

Morning Bid: Are China’s inflation, capital flows tides turning?

Signs of fatigue on Wall Street and mixed Chinese inflation data will set the tone for Asian markets on Monday, with growing expectations of a landmark policy change later this month from the Bank of Japan also likely to drive the Nikkei and yen. Inflation data from China on Saturday showed that consumer price inflation was notably higher than expected, but producer price deflation accelerated once again. But the producer price index fell 2.7% year-on-year, more than forecast and the 17th consecutive month that prices have declined on an annual basis.

Yahoo FinanceJamie McGeever

Oil prices dip as demand concerns offset tighter supply outlook

Oil prices in Asian trading on Monday continued their decline from the previous week amid concerns about slowing demand, despite a tighter supply outlook for 2024. Middling inflation data from China contributed to worries over reduced demand in the world's largest oil importer, exacerbated by uncertainty surrounding U.S. interest rates. Chinese consumer inflation saw a slight increase in February due to heightened spending during the Lunar New Year holiday, but producer price inflation contracted more than expected, reflecting ongoing pressure on the country's factories. Import data from China for the first two months of 2024 fell short of expectations, while the country's GDP target for the year disappointed, raising concerns about sluggish demand. Despite disruptions in the Middle East and ongoing production cuts by OPEC, concerns about weak demand outweighed expectations of tighter supplies. Investors are now awaiting key U.S. consumer price index (CPI) data on Tuesday to gauge the trajectory of interest rates, with the Federal Reserve closely monitoring inflation to determine its policy stance.

Oil prices dip as demand concerns offset tighter supply outlook By Investing.com

Oil prices dip as demand concerns offset tighter supply outlook

Investing.comAmbar Warrick

EU's Digital Markets Act hands boost to Big Tech's smaller rivals

The European Union's Digital Markets Act (DMA) aims to regulate major tech companies like Alphabet, Amazon, Apple, ByteDance, Meta Platforms, and Microsoft to create a fairer playing field for smaller rivals in Europe's digital market. This legislation mandates these tech giants to make their services more interoperable and provide users with more choices. For instance, Meta must make its Messenger and WhatsApp interoperable with eligible rivals, potentially benefiting smaller messaging apps like Signal and Telegram. Similarly, Google's Android users will have a choice of default search engines, opening opportunities for alternatives like DuckDuckGo and Ecosia. While the DMA offers advantages for smaller players, it poses challenges for incumbents like Apple, which must open up its App Store to allow app distribution outside its ecosystem, potentially impacting its profits. The implementation of these rules comes amid conflicts between Apple and companies like Fortnite maker Epic Games, highlighting the tension between tech giants and smaller competitors in the digital market.

EU’s Digital Markets Act hands boost to Big Tech’s smaller rivals By Reuters

EU’s Digital Markets Act hands boost to Big Tech’s smaller rivals

Investing.comReuters