The Hindu Business Line : Asian markets blink; await economic data

Rising crude oil futures, which look determined to break the $150 per barrel mark soon, took out an average 3 per cent from major Asian stock market indices this week. Twenty-five out of 28 indices ended in red with Shenzhen A (China), Vietnam and Pakistan falling flat on their faces with deep gashes in the range of 6.5-8.5 per cent. Shenzhen A was affected by poor sentiment surrounding the Sichuan earthquake, while Vietnam and interestingly Pakistan were down due to concerns that soaring inflation might not allow economies to grow fast. In Pakistan, stocks dropped after the central bank all of a sudden raised interest rates to tame inflation, which is at a 25-year high. Inflation continues to haunt most Asian countries such as India where inflation is at a three-and-half-year high.

Besides Thailand and Bangladesh, major countries such as Japan and Australia recovered from the $135-a-barrel oil shocks and managed to register apathetic gains ranging from 0.6-1.5 per cent for the week. Investors will be keenly awaiting key macroeconomic data emanating from Asia next week as Taiwan, Thailand and the Philippines will release their first quarter GDP data, which are expected to show slower growth.

This week, Singapore’s GDP data was out but fell short of the Government’s own estimates. The island nation’s economy grew by 6.7 per cent in the first quarter, less than the April 10 estimate of 7.2 per cent.

Inflation

In line with other Asian counterparts, consumer prices too have risen 7.5 per cent last month. Inflation casts a shadow on the outlook for corporate sector earnings, spilling onto investments and capital flows.

In other parts of the world such as Europe and Americas, the number of stock indices that fell outnumbered those with gains. Turkey, Italy and Ireland were the worst European markets for the week, while the US, Venezuela and Peru lost maximum in the Americas. Wall Street stocks dropped as investors got out of energy-sensitive sectors such as airlines and industrials with oil prices climbing higher. The Dow fell 3.9 per cent, the S&P 500 shed 3.5 per cent and the Nasdaq dropped 3.3 per cent. For all three indices, it was their worst weekly percentage drop in three months.

Major concern

While the slowing down of the Goliath - US, remains a big concern directly affecting many Asian countries – governments and central banks have bigger problems at hand. Flaring inflation needs to be controlled, so money supply may be expected to be tightened. But while hiking domestic interest rates is an option for some, not all can afford this prescription, especially the ones already plagued by growth concerns.

Hence, retail sales, inflation, manufacturing/industrial output and unemployment data for many Asian countries expected next week, will the hold key to where the markets head.

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