What’s happening: Asia Pacific stock markets closed mixed on Monday, following the release of several economic reports from China.
What happened: Markets in the region started the week on a mixed note despite broadly positive cues from Wall Street on Friday.
While inflation worries returned with crude oil prices surging to multi-year highs, investors grew concerned about growth in the world’s second-largest economy.
Why it matters: Commodity prices have recently been elevated with central banks around the world looking to roll back their loose monetary policies.
Investor sentiment was hit by the release of China’s data that showed economic growth slowing further in the third quarter, due to the crisis in the country’s property sector. China was expected to spearhead the recovery in the global economy from the pandemic downturn.
China’s GDP expanded by a mere 0.2% on quarter, while growing 4.9% year-over-year in the third quarter, missing market expectations of 5.2% growth.
Other economic releases provided some support to markets. Industrial production rose 3.1% year-over-year in September, while retail sales grew 4.4%. The unemployment rate in the country eased to 4.9% in September, reaching the lowest level since December 2018. Despite these numbers, China’s Shanghai Composite index slipped 0.12% on Monday.
Data released last week also showed September factory-gate costs in China rising at the fastest pace since the figure began being recorded in 1995. Sentiment was further hurt by US wholesale inflation climbing to a record high.
The recent figures are exerting pressure on central banks to begin tapering their stimulus measures, which have helped the global economy recover from the covid-19 led crisis. The US Federal Reserve is widely projected to begin tapering its asset-buying program before yearend, with a rate hike expected before 2023.
“How risk markets respond to the bringing forward of rate hike expectations will be key to watch this week, as will anecdotes from the profit reporting season to see how firms are dealing with higher input costs and to what extent they are able to pass this onto consumers,” National Australia Bank analyst Tapas Strickland said in a note to clients.
Japan’s Nikkei 225 index fell around 0.2% on Monday, after the country’s Prime Minister announced plans to hold sales tax at the current rate. Australia’s ASX/S&P 200 index gained 0.26%, while India’s BSE Sensex jumped 0.75%.
What to watch: Investors will continue to monitor the covid-19 situation around the world, as a rise in cases could negatively impact the pace of the global economic rebound. Markets will also focus on rising inflation in various countries and comments from central banks regarding their monetary policies.