An electronic board displays the stock indices of Shanghai and Shenzhen at Lujiazui financial district in Shanghai, China, October 25, 2022. REUTERS/Aly Song/File Photo LICENSING RIGHTS
Aug 28 (Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
As the week begins, asset markets across Asia will once again be dominated by key economic indicators, pro-market and pro-growth policy moves and diplomatic signals from China.
Asian markets will also have their first opportunity on Monday to react to speeches by the world’s most influential policymakers Jerome Powell, Christine Lagarde and Kazuo Ueda last Friday in Jackson Hole, although trading will be weaker than usual, as UK markets are closed for a bank holiday.
Looking at the Asian economic calendar this week, the Purchasing Managers’ Index reports for several countries – including China – will provide a first glimpse of how activity will unfold in August. GDP data from India and inflation figures from Indonesia and Vietnam are also available.
The biggest market driver later in the week is likely to be China’s services and manufacturing PMIs. Investors – and policymakers – will be desperate for signs the economy is picking up, but the forecast is for another month of weakness.
Figures this weekend showed that Chinese industrials’ July earnings fell 6.7% yoy, extending this year’s slump into the seventh month, and year-to-date earnings fell 15.5% yoy % declined.
In their latest attempt to reverse the malaise, Chinese authorities halved stamp duty on stock trading this weekend. The move, which took effect on Monday, provides for a 0.1% reduction in the tax on stock trading “to stimulate the capital market and strengthen investor confidence”.
Exchanges have also lowered their margin funding requirements, according to the China Securities Regulatory Commission.
It comes as US Commerce Secretary Gina Raimondo arrived in Beijing on Sunday for a four-day visit to strengthen business ties between the world’s two largest economies. Relations between the two superpowers are near rock bottom.
Asian equities start the week in a slightly better position than the past few weeks, but not by much. The MSCI Asia ex-Japan Index ended a three-week losing streak, but the rise of just 0.2% was the smallest since November, an even more disappointing rebound after a 10% cumulative decline in the previous three weeks.
The headwinds in the Asian market are strong and clear – financial conditions are tightening sharply, in large part due to the steady rise in US Treasury yields.
According to Goldman Sachs financial condition indexes, financial conditions around the world, in emerging markets and in China reached their tightest levels this year last week.
Higher US yields and a stronger dollar may be justified from a fundamental perspective, but the dollar has appreciated for six straight weeks and the US two-year yield is up 13 over the past 16 weeks.
Time for a break?
Here are key developments that could give markets more direction on Monday:
– Retail Sales in Australia (July)
– Michael Barr of the US Federal Reserve speaks
– Eurozone money supply (July)
By Jamie McGeever; Edited by Diane Craft
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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and impartiality under the Trust Principles.
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