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Data shock

A data driven day is on the cards for Asia Pacific investors as markets react to better than expected US numbers ahead of investment flow data from Japan and an employment report in Australia. Currency reversals and a mixed night for commodities, along with muted share market moves in Europe and the US, could mean most local indices remain close to their previous closing level.

US inflation and industrial production are both lifting at a rate higher than market forecasts. Headline inflation is at 2.1%, now above the US Federal Reserve’s target rate. Combined with comments from Chair Yellen that employment is nearing maximum, traders collectively decided rates are likely to move higher than previously expected. Stocks received modest support on this improved economic outlook but the USD jumped in response.

The USD surge saw gold, copper and oil move off recent highs. However iron ore added to recent gains, an indication of underlying strength.

Australian job expectations are soft. Consensus sees an addition of just 10,000 jobs today, with both unemployment and participation steady. This is a surprisingly modest forecast in light of recent volatility in the data. Similarly, estimates of investment flows to and from Japan are in line with previous, despite a lift in Yen volatility. This could see significant market reactions if the reads jolt investor complacency.

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