Asia morning update

A look at sector performance reveals that investors are still tilted towards risks overnight as defensive sectors in the likes of utilities, consumer staples and healthcare underperformed yesterday. That said, some cautious sentiments remain with selling towards the end of the trading session as investors await the release of the US CPI figure tomorrow. The Treasury 10-year yield continues to fall to the lower end of its consolidation zone yesterday, seemingly suggesting that the bond markets are shrugging off inflation worries for now.

Job openings figure came in at its record high for April. On one hand, it may indicate a robust economic recovery but on the other hand, it also reinforces the ongoing labour supply issue. Markets may shrug off the record figure for now and attention may be more focused on the June and July figure, as it will then provide an idea of whether removal of additional unemployment benefits will bring workers back to the labour force. If openings remain high then, it may potentially point to further wage increases and lead to some inflationary pressures.

Asia Open

Asia markets are set for a mixed open, with Nikkei -0.09% and ASX +0.55% at the time of writing. This follows a quiet US trading session overnight as investors remain on hold ahead of key US inflation data.

Key highlight today may be China’s inflation figures release. Estimates point to a higher figure for both the CPI and PPI. Seemingly, the pass-through from PPI to CPI has been relatively limited, with expectations for full-year CPI to remain below the target rate of 3%. That said, one to watch for a higher-than-expected figure release which may spur fears of a faster pace of policy shifts.

On the watchlist: Brent crude continues its push higher

Brent crude has once again hit its two-year high, with sentiments potentially supported by EIA June’s forecasts which reinforces the narrative of declining global oil inventories and a continued recovery in global oil consumption demand. The forecast for oil prices this year were also revised slightly higher from May’s forecast.

That said, one may note that the forecasts continue to show lower oil prices for 2022 as the report suggests accelerating growth in oil production will then outpace decelerating growth in global oil consumption, contributing to lower oil prices.

Brent crude has consolidated over the past week after hitting its two-year high, seemingly attempting to push higher yesterday. Should prices continue higher, one may potentially expect some resistance at the US$75.00 level, where prices see some weakness on previous three occasions.

Tuesday: S&P 500 +0.02%; DJIA -0.09%; Nasdaq +0.31%; DAX -0.23%; FTSE +0.25%