A pleasant surprise

THE number investors were waiting for finally came true. Inflation in the United States came in below expectation at 7.7% and that sent US markets upward.

That sent off a chain of events that put the US dollar in retreat in the hopes that the end for the Us-dollar rate hikes will be sooner in sight.

It was perhaps the biggest positive response to a number that fell below expectations but that is what the markets were prime for.

But the question now is what does that eventually mean for emerging markets such as Malaysia?

Such markets bore the brunt of the flight to safety as inflation gripped the world.

With inflation now missing expectations, the fact is it is still high, and the big worry now is the impending recession in the United States.

Job cuts are underway among the tech giants in the United States, at worse a hiring freeze. The slowdown or worse a recession in the world’s largest economy will spill over elsewhere in the world but one silver lining for a country like Malaysia is the relaxation of Covid-19 quarantine rules in China.

That will prompt optimism that growth would not be curtailed in China and that will only be a positive for Malaysian stocks and the economy.

But the road ahead, nonetheless, will need to be traversed with some trepidation.

There is still structural weakness around the world.

Slowly corporate profits, the ongoing war in Europe albeit a pause during the winter, and still stubborn inflation rates will mean real shocks for economies around the world.

People may look to the stock markets as a leading indicator as markets often foretell what is going to happen in the real sectors but the risk-on scenario may need a bit of time before cementing its stance.