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Week Ahead APAC: Risk-off builds amid Ukraine tension, Fed policy

US troops

Asia markets are expected to be under ongoing pressure in the week ahead following a two-day sell-off on US markets amid an intensifying Russia-Ukraine crisis and more aggressive monetary policy moves from the US Federal Reserve.

Ukraine tension

The White House warns that Russia could invade Ukraine within days, while Russia denies planning for an invasion. Risk-off sentiment will lead the markets amid the ongoing geopolitical tension in the coming days.

In the US

FOMC member James Bullard will be discussing key monetary policies in an interview with CNBC on Monday. Last Thursday, Bullard said he would support the Fed to increase the funds rate to a full percentage in July after a 41-year high CPI figure was recorded. Whether he will tone down the hawkish stance will be a key focus for investors.

The January FOMC meeting minutes will be released this Thursday. It is highly expected that the central bank will accelerate the pace of rate hikes and markets have priced in a 50-bps lift in March, according to the CME FedWatch Tool. 

The US producer price index (PPI) from December declined from November. The PPI was at 9.7% YoY, and core inflation excluding food and energy was at 8.3% from a year ago. It could mean that the upward pace of US inflation might be slowing, which makes the PPI data on Tuesday a crucial gauge for investors.

The US Yearly CPI and Monthly CPI Comparison

Source: Reuters, Bureau of Labour Statistics Consumer Price Index

The January retail sales number will be another key economic bellwether. December data showed a decline, but it is expected the figure will pick up in January, with any disappointing data to weigh on the Fed’s rate hike decision.

In Australia

The Reserve Bank of Australia will release its February meeting minutes on Tuesday. The bank decided to end its bond purchase program and closely watch inflation. The RBA is relatively dovish on rate hikes as local inflation is not as out of control as in the other major economies.

January employment data is out on Thursday and could show strong improvement in Australia’s labour markets.

In Canada

The soaring oil price certainly helps the Canadian dollar to move more independently than being driven by risk sentiment. The relatively strong local currency could also help to soften rising inflation. December CPI printed at 4.8% YoY. The forecast for January is at the same level. The retail sales data is expected to decline in December due to omicron restrictions.

Key economic events (14 Feb – 20 Feb) (AU time)

RBA Meeting Minutes 11:30am, Tuesday – More on RBA monetary policy stance

US PPI (Jan) 12:30am, Wednesday – Forecasted to be at 9.1% y/y, signs of moderation

CA Inflation Rate (Jan) 12:30am, Thursday – Forecasted to be at 4.8% y/y, close to 30-year high

US Retail Sales (Jan) 12:30am, Thursday – Expected to recover from -1.9% m/m in Dec

FOMC Minutes 6:00am, Thursday – Searching for clues on more hawkish stance from Fed

AU Employment Change & Unemployment Rate 11:30am, Thursday – Forecasted to be at +18.2K & 4.2%

Company earning/announcements (14 Feb – 18 Feb)

BHP Group (AU) – HY 2022, Tuesday

Airbnb (US) – Q4 2021, Tuesday After US Market Close

Roblox (US) – Q4 2021, Tuesday After US Market Close

Fortescue Metals (AU) – HY 2022, Wednesday

CSL (AU) – HY 2022, Wednesday

Applied Materials (US) – Q1 FY2022, Wednesday After US Market Close

Cisco (US) – Q2 FY2022, Wednesday After US Market Close

NVIDIA (US) – Q4 FY2022, Wednesday After US Market Close

Roku (US) – Q4 2021, Thursday After US Market Close

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