The Great Hall of the People during the Belt and Road Forum in Beijing, China, on Wednesday, 18 October 2023. (Photo: Qilai Shen/Bloomberg via Getty Images) 
Chinese consumer prices fell at the steepest pace in three years while producer costs dropped further into negative territory, data published Saturday showed. Some market participants may be disappointed as China’s regulators dropped the “forceful” wording when describing monetary policy for 2024, according to Bloomberg Intelligence. The dollar rose against most of its major peers.
Moves were muted in the rest of the region as traders looked ahead to an event-heavy week that featured US inflation data on Tuesday, a Federal Reserve policy decision on Wednesday and retail sales numbers on Thursday.
“China’s deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand,” Citigroup economists led by Xinyu Ji wrote in a note to clients. “There is no time for policy hesitation to prevent a vicious loop between deflation, confidence and activities” and there’s rising risk of an imminent reserve-requirement ratio and/or rate cuts, they wrote.
Japan’s benchmark indexes jumped at least 1% as Australian shares also gained following a rally in US equities Friday. Futures contracts for US shares were little changed in Asia.
This week, traders will also be keeping an eye on policy decisions at the European Central Bank and Bank of England, while jobs data in Australia and economic activity gauges in Europe are also due.
Softening US inflation and employment data in the past month have convinced investors that the Fed is done raising rates and ignited bets that cuts of at least 125 basis points were in store over the next 12 months. Traders scaled back those wagers to about 110 basis points of easing after the nonfarm payrolls data.
“People saying recession needs to have their heads examined,” Neil Dutta at Renaissance Macro Research said on Friday.
The S&P 500 closed last week with its longest winning run since November 2019, while Wall Street’s “fear gauge” — the VIX — climbed back to pre-pandemic levels. US two-year yields jumped 13 basis points to 4.72%. Swap contracts now show a 40% probability of a March rate cut — from over 50% prior to the economic data.
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Oil was little changed after it bounced back Friday on the US jobs report and plans to refill the Strategic Petroleum Reserve, but still closed out the longest weekly losing streak since late 2018 amid concern about an impending global glut.