April 4 (Reuters) – A look at the day ahead in Asian markets by Jamie McGeever.
Australia’s central bank will be the center of attention on Tuesday with its latest interest rate decision and, moreover, if the second trading day of the quarter is as eventful as the first then investor plates will be particularly full.
Oil prices on Monday posted their biggest rise in a year after a surprise OPEC+ production cut over the weekend, a slump in U.S. bond yields amid manufacturing data at recession levels and a precipitous plunge in Tesla shares after sluggish sales growth numbers.
Wall Street, however, took a “bad news is good news” position: lower yields and implied interest rates, coupled with buoyant energy stocks, ensured the Dow and S&P 500 ended in the green – the Dow was up 1%.
Tesla’s 6% plunge dragged the Nasdaq into the red, but the broader index’s decline was still just 0.27%.
Not only did US manufacturing activity contract in March at its fastest pace in nearly three years, all components of the Institute for Supply Management survey fell below the 50 growth/contraction mark for the first time since 2009.
The renewed decline in US Treasury yields – falling five to 10 basis points along the curve on Monday – continued to weigh on the dollar.
The greenback’s biggest gainer was the Australian dollar – up 1.5% on its best day in three months – ahead of Tuesday’s Reserve Bank of Australia policy decision.
diagram chart
Interest rate futures markets are pricing in a nearly 90% chance that policymakers will hold interest rates on hold at 3.60%, putting the year-long cycle of interest rate hikes on hold, at least for now.
Economists polled by Reuters are not quite so confident – 21 out of 37 forecast a 25 basis point rise to 3.85% and the remaining 14 are pausing.
Elsewhere in Asia, South Korea will release March inflation figures on Tuesday. Economists polled by Reuters expect monthly and annual inflation rates to slow.
Japan’s monetary base has exploded beyond recognition in recent years thanks to significant monetary stimulus and liquidity injections from the Bank of Japan, so the monthly numbers rarely attract much attention.
That could change with Tuesday’s March numbers, however, given last week’s US numbers that showed the US money supply has fallen by the most since the 1930s.
In fact, Japan’s monetary base has contracted year-on-year every month since September.
Here are three key developments that could give markets more direction on Tuesday:
– Interest rate decision in Australia
– Inflation in South Korea (March)
– Japanese monetary base (March)
By Jamie McGeever; Editing by Josie Kao
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Jamie McGeever
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