Asian markets mixed toward the weekend

<p>Asian stocks were mixed despite negative offshore leads. Stocks in Japan, Singapore and China were lower but Australian shares managed to post reasonable gains after […]</p>

Asian stocks were mixed despite negative offshore leads. Stocks in Japan, Singapore and China were lower but Australian shares managed to post reasonable gains after losing ground yesterday. Regional macro news was dominated by a moderation in Chinese inflation and downward revision to Japanese GDP.

Inflation in China eased to 6.2% in August after July’s 6.5% reading. This is still above the People’s Bank of China’s (PBOC) 4% target range. The August number highlights recent efforts to curb inflation are working but the Chinese economy remains strong and the target is unlikely to be met anytime without threatening growth. Regional inflation underpins our view of Australia finding it hard to cut rates despite yesterday’s jobs number.

Australia does not have the same inflationary issues as China but it is not immune from regional inflation either and so the RBA is unlikely to lower rates unless a very clear and convincing deterioration in Australian economic conditions emerges.

As we wrote yesterday, states with rising unemployment in the jobs data – Queensland and Western Australia – are ones with the best job prospects given the current infrastructure and mining investment pipeline. The Australian dollar is sitting comfortably just above A$/US$1.06.

All eyes will be on the G7 meeting over the weekend which isn’t expected to deliver any material outcome. We expect to hear more commitment towards global growth, fiscal consolidation, currency stability and inflation targeting.

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