Malaysian Stocks Expected To Open Higher After USA Consumer Price Index Increase

Malaysian Markets are expected to continue their gains after Consumer price Index in the US increase 0.6%, the same amount as the previous month. The market expectation was of 0.5%. There hasn’t been a negative reaction, Wall Street is currently 56 points higher as the increase was mainly due to higher gasoline prices.

Markets follow closely the CPI because it is an important inflation indicator, an increase in the overall prices of goods and services will have an influence in the interest rates.  Banks and lenders will have to adjust how much interest they charge to be able to recoup the purchasing power on the money that the have lent.

Market usually will fall if the CPI increase by large number and will rally if the the CPI is negative or small. Low inflation will keep interest rates low. Typically low interest rates is favorable for business investment.

In other news that might help the Asian markets. Moody’s has confirmed that the possible ECB intervention in buying public debt in Spain, will increase Spain possibilities of obtaining finance in the open market. Meanwhile Fitch rating agency has reduce Spain to BBB Moody has keep Spain in Baa3

Wall Street extended gains today after comments in Germany reinforced the view that Germany is open to Spain’s seeking a precautionary credit line from Europe’s rescue fund.

Asian stocks might follow suit. The Malaysian  KLCI is 250 point since October last year to 1653.52.

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