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Shaky start to huge data week

Tesla, man and machine

Asia Pacific markets are looking at a nervous start to the trading week ahead of the release of important data from around the world. Markets are particularly sensitive to economic data at the moment because of the disagreement between central banks and bond traders about the inflation outlook.

Bond markets continue to signal the end of the interest rate reduction cycle. The darker side to any vaccine inspired economic recovery is the inflationary pressures flowing from higher growth. Continuing to maintain highly accommodative monetary settings as inflation lifts threatens the stability of the global monetary system. If the inflationary pressures reflected by sharply lower bond prices are evident by mid-year, central banks will have little choice but to wind back their current support.

This is rattling share investors’ nerves everywhere. On Friday night, energy and base metals markets slipped after a week of strength, joining the growing concerns around the interplay of better growth and monetary policy. A falling gold price shows that the main concerns are about higher rates, over-riding any safe haven attraction to the yellow metal.

This week brings PMIs from around the world, readings on inflation, and US national accounts and employment data. The activity indicators are likely to fall under a good news is bad news dynamic, especially if accompanying inflation data surprises on the upside. Analysts expect 180,000 new jobs were created in the US in February, and a substantially higher read on Friday night could damage market sentiment.

Forex markets are showing a slight growth tilt in trading this morning, with small gains for the Australian and New Zealand dollars. Futures indicate opening gains for shares, after US tech stocks defied a general downdraft on Friday night to post gains. Local volumes may lift now that the company reporting season in Australia is closing, meaning institutional investors may begin re-weighting their portfolios.

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