Office workers check their cellphones to check local online banking app Toss as they gather at the Seoul Museum of Art during a lunch break in Seoul, South Korea April 13, 2023. REUTERS/Kim Hong-Ji/File Photo Acquire License Rights
Aug 24 (Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
Interest rate decisions and policy guidance from South Korea and Indonesia will take center stage in Asia on Thursday, as investors also grappled with the strong backlash in global equity and bond markets the day before.
Global stock markets and Wall Street soared on Wednesday, buoyed by optimism about Nvidia’s earnings, and bond yields fell after gloomy PMI reports from Europe cast doubt on central banks’ willingness to hike further.
The tech-driven rally on Wall Street gave the Nasdaq its best day in a month and the Nvidia mania seems well founded.
The giant, which makes artificial intelligence chips, reported strong second-quarter sales after the close and expected third-quarter sales of about $16 billion, beating analysts’ expectations of $12.6 billion .
Asian stocks also enjoyed the Nvidia ride on Wednesday and are now up two straight days for the first time this month. But no thanks to China – the blue-chip Shanghai CSI 300 index plunged again as selling by foreign investors extended to a 13th straight session, leading to total outflows of more than $10 billion.
The MSCI Asia ex-Japan index is down 8% so far in August and is on course for its biggest monthly loss since January 2016, when Chinese markets were in turmoil and the central bank reduced foreign exchange reserves to counter capital flight and the yuan to support .
Investors could go into Thursday in a ‘bad news is good news’ sentiment as risk appetite is bolstered by the sharp fall in bond yields after PMIs showed activity in Europe’s services and manufacturing sectors is falling rapidly.
Good news is that market-based borrowing costs are falling and that the Bank of England and the European Central Bank will raise rates far less than expected, if at all, but bad news is that growth appears to be crumbling.
Turning to Asia policy, the Bank of Korea is expected to keep interest rates unchanged at 3.50% for the fifth consecutive day on Thursday and leave them unchanged for the rest of the year.
With inflation falling to 2.3%, its lowest level in over two years and close to the BOK’s 2.0% target, markets are betting the tightening cycle is over.
Bank Indonesia is also expected to keep interest rates stable at 5.75% for the seventh time in a row and for the rest of the year.
With inflation in Indonesia last seen at a 16-month low of 3.08%, well within the 2%-4% target range, the central bank’s focus is now on keeping the currency stable. The rupiah is currently hovering around last week’s five-month low of 15,359 per dollar.
Here are key developments that could give markets more direction on Thursday:
– Interest rate decision for South Korea
– Interest rate decision for Indonesia
– Producer price inflation in South Korea (July)
By Jamie McGeever; Edited by Josie Kao
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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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