©Reuters. File photo: A passerby passes an electronic bulletin board displaying international stock indexes outside a bank in Tokyo on March 22, 2023.Reuters/Issei Kato/File photo
Written by Jamie McGeever
(Reuters) – Future outlook for the Asian market.
Asian markets rebounded late on Friday after a rebound in Wall Street and Chairman Jerome Powell’s clearest signal yet that the Fed has completed its rate hikes and could move on to them soon. It is poised to start the week on a strong note after US interest rate expectations plummeted. Cut them.
rose to its highest level this year, and continued easing of financial conditions due to lower dollar and bond yields will pave the way for a positive open for Asian stocks and risk assets on Monday.
The dollar fell 3% in November, its biggest monthly decline in a year, and last week marked the third consecutive week of declines. Yields on two-year U.S. Treasury notes fell 40 basis points last week, the steepest decline since March, and the implied rate on December 2024 SOFR futures fell below 4% for the first time on Friday.
It packs a powerful punch. Many will argue that the U.S. bond and interest rate markets are too carried away and that the Fed will not ease as quickly and aggressively next year.
But Fed policymakers are currently in a “blackout period” ahead of their December 12-13 policy meeting. This means that on Monday, when the economic calendar is also very light, there will be no guidance from officials to take the wind out of investors’ sails.
There seems to be room for a rebound in Asian stocks, but depending on your point of view, the region’s underperformance has rarely been this bad in recent years.
Highlights on Monday’s regional calendar include New Zealand trade figures and Australian inventory and corporate earnings data, both for the third quarter.
Economists polled by Reuters expect New Zealand’s terms of trade to fall 1.9% quarter-on-quarter, Australia’s inventories to fall 0.6% and export volumes to fall 3.8%.
The rest of this week’s economic policy calendar is full of potentially market-moving moments, including interest rate decisions in Australia and India, inflation statistics in South Korea, the Philippines and Thailand, and GDP in Japan, Australia and South Korea.
On the policy front, the Reserve Bank of Australia is expected to keep the cash rate unchanged at 4.35% on Tuesday, a 12-year high, according to 28 out of 30 analysts surveyed by Reuters. The remaining two countries plan to raise interest rates by 25 basis points.
New Zealand’s central bank surprised markets last week with its hawkish comments in response to its decision to keep interest rates on hold, and the RBA may echo a similar message.
In stark contrast to the Fed, interest rate futures markets are barely pricing in next year’s rate cuts from the RBA. In fact, current pricing suggests that the potential for rate hikes is greater than the potential for rate cuts in the coming months.
Here are the key trends that could give further direction to the market on Monday:
– New Zealand Trade (Q3)
– Australian inventories, corporate profits (3rd quarter)
– Korea Monetary Base (November)
(Written by Jamie McGeever; Edited by Diane Craft)