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Asia: Inflation is easing, though underlying pressure remain

10.10.11

Markets volatile, despite reassuring data

Asian markets continue to fluctuate in line with global trends. For the week Asian markets ended up, on hopes that European leaders are getting closer to a resolution to their sovereign debt and banking woes, as the European Central Bank and Bank of England announced new liquidity measures on Thursday (see Markets). That said, markets remain on edge, as seen in rising CDS spreads and concerns about the sustainability of China’s growth (Chart 1). These jitters come despite recent data showing the region growth resilience to date. China’s September PMI outturn was a relief, showing an upturn (see Highlights), and some of the recent trade figures in the region have been reassuring as well. Meanwhile, a number of countries released inflation prints for September (see below), showing an easing of price pressures as expected (Chart 2), providing room for policy maneuver in the event of a worsening global environment, as flagged this week by the Reserve Bank of Australia in its policy meeting. Bucking this trend was Vietnam, which announced a rate hike yesterday, as its struggles to tame inflation and restore investor confidence.

Source: FXstreet.com