Marketmind: Markets eye China PPI, CPI

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever.

Chinese producer and consumer price inflation reports for November grab the limelight in Asia on Friday, with investors hoping to round off a bruising week on a positive note.

That’s bruising for regional and global stocks, not for China’s, which are on course to post a second straight weekly gain of at least 2%. Benign inflation data will help achieve that.

Producer prices are expected to have fallen further in November on an annual basis to -1.4%, the second month in a row of outright decline. This would be the weakest rate of annual factory gate inflation in two years.

The PPI has fallen every one of the past 12 months.

Meanwhile, analysts expect the annual rate of consumer price inflation to slow to 1.6% from 2.1% in October, which would be the slowest rate of increase since March. On a month-on-month basis, they expect a decline of 0.2%, the fastest rate of monthly deflation since May.

Chinese CPI

Investors will probably welcome market-friendly inflation prints, which are being driven in part by the base effects from falling energy and commodity prices.

U.S. oil futures closed on Thursday at their lowest this year, and importantly from an inflation perspective, the year-on-year change is now negative. Brent crude has slumped almost 25% in a month, and its year-on-year change is about to turn negative for the first time since February 2021.

China, the world’s biggest energy consumer, is a major trade partner of oil-producing Gulf states and bilateral ties have expanded and strengthened in recent years.

Chinese President Xi Jinping, in Saudi Arabia on Thursday, heralded “a new era” in Arab ties. The Saudi energy minister on Wednesday said Riyadh would stay a “trusted and reliable” energy partner for Beijing and the two would boost energy supply chain cooperation by setting up a regional center in the kingdom for Chinese factories.

Xi is due to meet other Gulf oil producers and attend an Arab leaders gathering on Friday.

But price pressures in China are also easing because of COVID-19 lockdowns, restrictions and sluggish economic activity. Perhaps investors would prefer signs of inflation bottoming out if it meant the economy was recovering.

China’s inflation figures follow a downside surprise in euro zone consumer price inflation, and economists expect upcoming U.S. producer and consumer price inflation numbers to have eased in November too.

Three key developments that could provide more direction to markets on Friday:

– China CPI (November)

– China PPI (November)

– South Korea current account (November)

(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Josie Kao)