Asian markets opened cautiously on Monday, with investors treading carefully ahead of a pivotal week marked by crucial economic data from the United States and a closely watched European Central Bank (ECB) meeting. The mixed sentiment reflects both profit-taking from recent gains and uncertainty about the direction of interest rates in developed economies.
In Tokyo, the Nikkei 225 slipped by 0.5%, as a stronger yen weighed on exporters. Investors remain alert to the Bank of Japan’s next move, especially amid speculation that the central bank may further tighten policy this summer. In contrast, South Korea’s KOSPI edged up 0.3%, led by semiconductor stocks, while Australia’s ASX 200 was flat as mining shares were dragged down by a softer iron ore outlook.
Chinese markets were muted, with the Shanghai Composite dipping 0.2% and the Hang Seng in Hong Kong struggling to stay above the flatline. Weak domestic demand and tepid export figures continue to pressure sentiment. Despite targeted stimulus efforts, concerns about China’s post-Covid growth trajectory persist.
Investors across the region are bracing for a busy macroeconomic calendar. In the US, all eyes will be on Wednesday’s Consumer Price Index (CPI) report, which is expected to show whether inflation continues to cool. The Federal Reserve’s interest rate decision, due the same day, is unlikely to bring a rate hike, but Fed Chair Jerome Powell’s commentary will be scrutinised for clues on the timing of any future cuts.
Meanwhile, in Europe, the ECB meets on Thursday, and markets have priced in a likely rate cut – the first since 2019. However, the central bank’s forward guidance will be crucial. Policymakers face a delicate balance between supporting faltering growth and maintaining credibility in the fight against inflation.
Futures point to a subdued start for European equities, with the Euro Stoxx 50 and DAX showing slight losses in early trade. UK markets are also expected to open marginally lower, as traders weigh the political backdrop following the announcement of a general election on 4 July.
In the US, equity futures are modestly higher, with S&P 500 and Nasdaq futures both up around 0.2% ahead of the open. Wall Street’s recent rally has been driven by tech optimism and expectations of a September rate cut, though persistent inflation risks and labour market tightness remain on investors’ minds.
As the day unfolds, attention will shift to speeches from central bankers, earnings updates from several mid-cap firms, and fresh economic indicators from Germany and the UK. Market participants are likely to stay defensive until more clarity emerges mid-week.
Volatility is expected to pick up, especially if CPI surprises to the upside or if the Fed hints at a longer wait before easing. For now, the tone remains cautious, with traders positioning themselves for a potentially decisive stretch in global markets.
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