July 3 (Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
Asia starts the new quarter with a sense of optimism and momentum, buoying global markets on the back of better-than-expected US economic data and growing belief that risky assets can withstand ‘higher’ global interest rates for longer.
If this continues, Asia may have significant upside potential relative to other regions – apart from Japan, Asian equities significantly underperformed in the first half of the year and Chinese equities actually fell.
Global equities rose nearly 13%, Japan’s Nikkei rose 27% to hit new 33-year highs – but the MSCI Asia ex-Japan index rose just 1.65% in dollar terms. Chinese blue chip shares fell 0.75%.
Trading volume on Monday may be light due to the US July 4 holiday, but Friday’s Wall Street rally should boost risk appetite as investors brace for a flood of top-notch regional economic data and some policy decisions this week.
Purchasing Managers’ Index (PMI) reports from across Asia-Pacific, including China, India, South Korea and Australia, released on Monday will provide a first look at private sector services and factory activity in June.
Consumer price inflation figures from South Korea, Indonesia, Thailand, the Philippines and Taiwan will show how inflation has declined and fluctuated across the continent over the past month, while the central banks of Australia and Malaysia are set to announce their latest interest rate decisions.
The Asian economic calendar on Monday will be dominated by a range of manufacturing PMIs including China’s, Indonesia’s inflation, Japan’s second quarter “Tankan” business sentiment survey and the Australian housing market.
China’s Caixin Manufacturing PMI is expected to fall to 50.2 from 50.9, suggesting a slowdown in factory sector growth near the point of stagnation. The official Purchasing Managers’ Index (PMI), which is expected to contract for the third month, will be released on Friday.
China’s economic performance since the lifting of COVID-19 restrictions has been extremely disappointing, putting severe downward pressure on the country’s stocks, bonds and currencies. China’s economic surprise index has collapsed and is now deep in negative territory.
Investors will be on the lookout for signs of FX intervention by the Chinese authorities to curb the yuan’s decline. The central bank last week questioned some foreign banks about the interest rates they offer their customers on dollar deposits and even ordered a commercial lender to lower those rates, sources said.
They will also be wary of warnings from the Japanese authorities that the yen’s decline is unwarranted. The yen lost almost 10% of its value against the dollar in the first half of the year.
Equity investors, meanwhile, will also digest Sunday’s announcement by Tesla Inc (TSLA.O) that the company delivered a record 466,000 vehicles in the second quarter, beating market estimates of around 445,000. Record sales are also expected in China.
Deliveries beat forecasts, but only thanks to hefty rebates and incentives. Underlying demand could be significantly weaker.
Here are key developments that could give markets more direction on Monday:
– Manufacturing PMIs for China, India and South Korea (June)
– Indonesia CPI inflation (June)
– Japanese “Tankan” business survey (Q2)
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.
Jamie McGeever
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