June 29 (Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
The cold reality of “longer-term higher” interest rates, which cooled investor sentiment on Wednesday, will give a cautious tone to Asian trading on Thursday, with investors also wary of possible exchange rate action in Tokyo and Beijing.
For regional data, retail sales and consumer confidence from Japan and Australia will be the focus, while investors with exposure to Vietnam will be paying close attention to Hanoi’s second quarter GDP growth numbers.
The broad narrative running through markets on Wednesday was more dovish than on Tuesday – and less coherent – after G4 central bank leaders sent hawkish signals from the European Central Bank’s annual celebration in Sintra, Portugal.
Wall Street struggled under the weight of rising US interest rate expectations, the dollar rose and Treasuries rallied, and the US yield curve inversion deepened somewhat. So far, so “risk-free”.
But US stock market volatility fell, oil prices soared, Apple stock soared to a new all-time high, and other mega-tech stocks rose as well.
Asian tech may be gaining sympathy on Thursday, but the sector is a key source of tensions between the US and China — US officials are considering tightening an export control rule aimed at slowing the flow of artificial intelligence chips into China by crowds The computing power that the chips can have is limited.
At the macro level, a further slump in Chinese industrial profits was another reminder of the troubles the world’s second largest economy is struggling with.
Annual profits at China’s industrial companies fell at double-digit rates in the first five months as slowing demand squeezed margins.
The economy appears to be losing momentum on many fronts. Further monetary easing may be on the cards, and if so, the yuan is likely to close in on a fresh 15.5-year low of 7.30 per dollar.
Investors are wondering exactly how Beijing stands on the yuan right now, after taking action to support the currency for the first time in almost eight months on Tuesday and then letting it slide again on Wednesday.
The yen, meanwhile, fell to a fresh seven-month low at around 145.00 per dollar on Wednesday. Many analysts see a yen-buying intervention by the Japanese authorities between 145.00 and 150.00 per dollar as increasingly likely.
Both the yuan and the yen are historically weak. If one rejects the currency, the authorities in the other country might be willing to drop their currency as well.
Here are key developments that could give markets more direction on Thursday:
– Japanese Retail Sales and Consumer Confidence (May)
– Retail Sales in Australia (May)
– GDP Vietnam (Q2)
By Jamie McGeever;
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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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