Markets are trading cautiously this morning after a surprising reaction to data in the US overnight. Overall, investors are tilting towards growth, but constrained moves and lower volumes best describe early Asia Pacific trading. An imminent announcement from the Reserve Bank of New Zealand is weighing on any exuberance, as are tonight’s listing of crypto exchange Coinbase and reports from key US financial stocks.
Core US CPI grew at a higher than expected 1.6% in March, edging closer to the Federal Reserve’s 2% target. However market reactions seem attuned to Fed undertakings to look through any increases in inflation this year. Bonds staged a modest rally, and higher growth stocks found support. The US dollar weakened, as interest rate expectations dropped and confidence grew.
This reaction saw Asia Pacific share futures rise in overnight trading. Stocks are higher in early trading in New Zealand and Australia. The RBNZ is not expected to change interest rate settings or its forecasts today, but any commentary about the white hot NZ property market could fuel market reactions.
Cryptocurrencies are firmly in traders’ sights again. Bitcoin rose to a new highwater mark above US $62,000 last night, and has breached the $63,000 level in Asia Pacific trading. Other cryptos are benefiting from the updraft. The moves are good news for the owners of Coinbase, which will become publicly tradeable tonight after a direct listing on the Nasdaq exchange. This leveraged play on the world’s most volatile asset class is attracting plenty of attention.
The US reporting season gets serious tonight with reports from Goldman Sachs, JP Morgan and Wells Fargo. The exposure of financial stocks to the broader economy may mean investors treat this as a litmus test for the health of the broader US economy in the first quarter of 2021.