A passerby walks past an electric monitor displaying the stock price index of various countries in front of a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo ACKNOWLEDGE RIGHTS
Dec 4 (Reuters) – A look at the day ahead in Asian markets.
Asian markets are poised to start the week with a lead, encouraged by Friday's late Wall Street rally and the collapse in U.S. interest rate expectations after Fed Chairman Jerome Powell gave the clearest signal yet that the Fed will continue with the Interest rate hike is ready and could soon move to cut them.
The S&P 500's rise to its highest level this year and continued easing of financial conditions driven by the falling dollar and bond yields are likely to pave the way for a positive opening for Asian stocks and risk assets on Monday.
The dollar lost 3% in November, its biggest monthly decline in a year, and fell for a third straight week last week. The two-year U.S. Treasury yield slumped 40 basis points last week – the biggest decline since March – and the implied interest rate on December 2024 “SOFR” futures fell below 4% for the first time on Friday.
This packs a huge punch. Many will argue that the US bond and interest rate markets are getting far too carried away and that the Fed will not ease rates as quickly and aggressively next year.
But Fed policymakers are now in their “blackout phase” ahead of the Dec. 12-13 policy meeting. This means that there will be no official guidelines to take the wind out of investors' sails, especially not on Monday when the economic calendar is also very bleak.
There appears to be room for Asian stocks to recover – in some ways the region's underperformance has rarely been worse in years.
Monday's regional calendar highlights include New Zealand trade data and Australian inventory and corporate earnings data, all for the third quarter.
Economists polled by Reuters expect New Zealand's terms of trade to fall 1.9% from the previous quarter, Australian inventories to fall 0.6% and export volumes to fall 3.8%.
The economic and political calendar for the rest of the week has many more potentially market-moving moments, including interest rate decisions from Australia and India, inflation numbers from South Korea, the Philippines and Thailand, and GDP from Japan, Australia and South Korea.
On monetary policy, the Reserve Bank of Australia is expected to keep its key interest rate at a 12-year high of 4.35% on Tuesday, according to 28 of 30 analysts polled by Reuters. The other two are seeking a 25 basis point increase.
New Zealand's central bank surprised markets last week with the hawkish rhetoric that accompanied its decision to keep interest rates unchanged, and the RBA could send a similar message.
In stark contrast to the Fed, interest rate futures markets are hardly pricing in any rate cuts from the RBA next year. In fact, the probability of an increase in the coming months is greater than that of a decrease, as current prices show.
Here are key developments that could give markets more guidance on Monday:
– New Zealand trade (Q3)
– Australia Inventories, Corporate Profits (Q3)
– Currency base of South Korea (November)
By Jamie McGeever Editing by Diane Craft
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