Global Markets Await U.S. Inflation Data, Japanese Bonds Squeeze

A woman walks by an electronic stock board of a securities firm in Tokyo, Tuesday, Aug. 20, 2019. Asian shares were mostly higher Tuesday after Wall Street rallied on the U.S. decision to give Chinese telecom giant Huawei another 90 days to buy equipment from American suppliers. (AP Photo/Koji Sasahara)
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On Tuesday, world shares held steady, just below record highs, as investors awaited highly anticipated U.S. inflation data. Meanwhile, Japanese bonds faced pressure as the central bank scaled back its bond buying program.

According to Reuters, MSCI’s world share index remained flat for the day, sitting just 0.35% below mid-March’s all-time high. In Europe, national and region-wide share benchmarks hovered near record levels, with U.S. S&P 500 futures also showing stability.

While a positive first-quarter earnings season has bolstered stock markets in recent weeks, investors exercised caution ahead of significant U.S. inflation data. The U.S. producer price index, due at 1230 GMT, was the focal point for Tuesday, although attention remained fixated on Wednesday’s consumer inflation figures, a pivotal monthly data release.

Jan von Gerich, chief strategist at Nordea, noted, “Today’s a warm-up, but tomorrow’s U.S. CPI is what people are waiting for.” Expectations are for core CPI to slow from an annual 3.8% in March to 3.6% for April. Investors are eager to determine whether recent upside surprises in inflation are transient or indicative of a sustained trend that could influence Federal Reserve policy.

The benchmark 10-year U.S. Treasury yield slightly decreased to 4.473%, down from mid-April’s five-month high but notably higher than the beginning of the year. A survey by the New York Fed showed Americans expect inflation a year from now to reach 3.3%, higher than the previous month’s forecast.

In other market news, British government bonds outperformed European peers following data showing robust wage growth but a softer labor market. In company updates, Delivery Hero surged 20% after Uber announced a deal to acquire its food delivery business in Taiwan, while Anglo American outlined plans for its steelmaking coal, nickel, and platinum units amid a takeover bid from BHP.

Later in the day, Alibaba is expected to report results, and Federal Reserve Chair Jerome Powell is scheduled to speak.

In Asia, Hong Kong’s Hang Seng index surged as money flowed in steadily from mainland China, buoyed by news of China issuing one trillion yuan in special bonds. Japanese government bond yields rose to their highest since November after the central bank reduced bond purchases unexpectedly.

Despite these fluctuations, the yen remained under pressure against the dollar, while Brent crude futures dipped slightly, and spot gold saw marginal gains.