By Jamie McGeever
(Reuters) – A look ahead for the day ahead in Asian markets by Jamie McGeever.
Three central bank monetary policy decisions dominate the economic calendar in Asia this week, as investors continue to grapple with the profound market implications of the most dramatic re-rating of US interest rate expectations in decades.
This comes against an increasingly jittery geopolitical backdrop — Sino-US relations are deteriorating over the spy balloon crisis, and the one-year anniversary of Russia’s invasion of Ukraine falls on Friday.
US markets are closed for Presidents Day Monday so Asian activity and volumes will be lower than usual. This could give traders a rare respite to reflect on the searing rise in US market-based interest rates and yields.
Wall Street and global markets as a whole have held up remarkably well – the S&P 500 and MSCI World Index ended the week down just 0.3% and the Nasdaq was up 0.6%.
Asia felt the heat more. The MSCI Asia ex-Japan index fell for three straight weeks, its worst rise since October. Chinese stocks are also down for three weeks, with last week’s plunge accelerated by Friday’s 1.5% plunge – the sharpest this year – after Lenovo reported its biggest sales decline in 14 years.
The People’s Bank of China is expected to set its benchmark lending rates on Monday morning. Many analysts expect benchmark lending rates to remain flat for a sixth month, with the one-year lending rate remaining at 3.65% and the five-year lending rate at 4.30%.
GRAPH – Chinese interest rates
https://fingfx.thomsonreuters.com/gfx/mkt/gkvlwdrjopb/ChinaRates.jpg
The Reserve Bank of New Zealand is expected to scale back tightening on Wednesday, raising interest rates by half a percentage point to 4.75%. Dosing will then be repeated at a peak rate of 5.25% through mid-year, according to a Reuters poll.
Meanwhile, the Bank of Korea is expected to keep interest rates on hold at 3.5% on Thursday, which would be its first decision to hold rates after consecutive hikes since April.
But don’t be surprised if the outlook is more hawkish than it was last month – inflation is stubborn, the US policy outlook has changed dramatically and the won has fallen 7% over the past two weeks.
GRAPH – Interest rates in New Zealand and South Korea
https://fingfx.thomsonreuters.com/gfx/mkt/movaklxyeva/RBNZBOK.jpg
Other market-moving Asian economic data this week include Japan’s January CPI on Friday – the annual rate is expected to rise to a 41-year high of over 4% – and Hong Kong and Taiwan’s Q4 GDP final readings on Friday Wednesday.
On the corporate side, the controversy surrounding the Indian Adani Group is becoming increasingly political. Reuters reported on Friday that the Indian government has ordered the country’s top court to examine the “substantiveness” of US short seller Hindenburg Research’s allegations against the group.
Here are three key developments that could give markets more direction on Monday:
– Interest rate decision in China
– Current account Indonesia (Q4)
– Eurozone Consumer Confidence (February)
(By Jamie McGeever; Edited by Deepa Babington)
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