All eyes are on US inflation data this week, while China faces deflationary pressures

The US and China are on opposite inflation tracks — with the US battling stubborn price growth, and China sliding toward deflation. In the US, consumer prices likely rose 3.2% y-o-y in February, reflecting slow but persistent disinflation and keeping the Federal Reserve in a cautious stance, Bloomberg reports. The Bureau of Labor Statistics’ figures will be out this Wednesday.

In the US, core CPI is projected to have climbed 0.3% last month, easing slightly from January’s 0.4% gain but still well above the Fed’s 2% target. Producer price data on Thursday and consumer sentiment data on Friday will offer further insight into inflationary pressures. However, with investors awaiting March inflation data for clearer signals on Fed policy, Treasury yields remain elevated amid ongoing uncertainty over rate cuts.

REMEMBER- The country’s inflation risks could worsen. Trump-era trade measures — including 25% duties on steel and aluminum and looming reciprocal tariffs — threaten to push prices higher, further complicating Fed rate-cut bets.

In contrast, China’s inflation slump is deepening, with the country’s consumer price index (CPI) falling 0.7% last month — its first negative reading in 13 months. Its core CPI posted its first decline since 2021 and factory prices fell for a 29th straight month. Goldman Sachs estimates that an early Lunar New Year shaved 0.7 percentage points off February’s CPI reading, but sluggish consumer spending remains the bigger concern. The latest reading raises deflation fears as domestic demand weakens, Bloomberg reports separately.

Beijing has set a 2% inflation target for 2025, its lowest in two decades, and is ramping up stimulus efforts to counter prolonged price declines. Economist David Qu warns of an “urgent need for policymakers to deliver on pledged stimulus quickly,” adding that without strong fiscal and monetary support, “deflationary pressures will continue to weigh on the economy.”

How the rest of the world is faring:

• In Europe, inflation is cooling, but the ECB’s next rate move remains uncertain as industrial output shows signs of recovery;
• Middle East inflation is stabilizing, with Egypt’s February reading expected to drop sharply from 24%, setting the stage for rate cuts;
• In Latin America, Brazil’s inflation surged past 5.1%, likely prompting another rate hike, while Argentina’s price growth is slowing after last year’s crisis;
• In Asia, Japan’s wage-driven inflation continues to rise, while India’s cooling consumer prices are fueling speculation of policy easing.

MARKETS THIS MORNING-

Asian markets are rising this morning, with Japan’s Nikkei up in choppy trade, along with South Korea’s Kospi. On the other hand, mainland China’s CSI 300 fell 0.5%, while Hong Kong’s Hang Seng is down 0.6%. Wall Street stocks are expected to open lower, with Nasdaq futures leading the downward move after a volatile week that saw all indexes make significant losses.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.2% yesterday on turnover of SAR 4.0 bn. The index is down 1.7% YTD.

In the green: Dar Al Arkan (+7.5%), Dallah Health (+6.8%) and Bupa Arabia (+4.8%).

In the red: Kingdom (-10.0%), Arabian Shield (-7.5%) and Batic (-7.0%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.1% yesterday on turnover of SAR 50.0 mn. The index is down 0.5% YTD.

In the green: Ratio (+15.2%), Quara (+9.9%) and Balady (+8.1%).

In the red: Leaf (-14.0%), AlRazi (-8.7%) and AlJouf Water (-5.9%).

CORPORATE ACTIONS-

Electrical Industries Company is distributing SAR 140.6 mn in dividends for 2H 2024 at SAR 0.125 apiece, it said in a disclosure to Tadawul. Distribution is scheduled for Sunday, 13 April.