2023-10-18 21:45:00
Financial markets columnist Jamie McGeever gives you an overview of Asian markets for the day ahead.
A sea of red in global stock markets and another rise in U.S. Treasury yields on Wednesday will likely ensure a bearish opening in Asia on Thursday, as investors also prepare for monetary policy decisions and the outlook for South Korea and the Indonesia.
The regional economic data calendar is also quite busy, with the latest trade figures from Japan and Malaysia, and the latest unemployment figures from Australia and Hong Kong. Investors could also deliver a delayed or revised verdict on Wednesday’s generally upbeat Chinese economic indicators, which included 4.9% year-on-year growth for the third quarter, far stronger than most economists had expected. Chinese stocks fell sharply on Wednesday, pressured by deepening turmoil in the country’s real estate sector, as major private developer Country Garden flirts with default. Could investors decide that GDP and other indicators show the economy is doing better than feared?
Maybe. But the combination of a new multi-year high for U.S. bond yields and a sharp fall on Wall Street looks set to deal an early blow to Chinese and other Asian markets on Thursday. In addition to the rise in bond yields on Wednesday, Wall Street suffered from falling US profits. Stocks saw their biggest decline in two weeks, even though the message from Fed officials was that interest rate hikes were likely over.
The selling pressure weighing on the US bond market simply won’t let up. The 10-year yield crossed the 4.90% mark for the first time since 2007, and the 2-year yield reached its highest level in 17 years, at 5.2440%. The yield curve has also steepened. The 2s/10s yield curve has steepened 14 times over the past 17 sessions, and Wednesday’s move was the biggest in three weeks. Additionally, oil and gold prices continue to rise, reflecting continued investor concern over events in the Middle East.
As for currencies, the dollar is approaching 150.00 yen. The spread between US and Japanese two-year yields reached 517 basis points on Wednesday, the widest gap in favor of the dollar since December 2000.
Will the Bank of Japan intervene? She intervened in the Japanese government bond market on Wednesday to buy bonds and cap the 10-year yield, which had hit a new decade high of 0.819%. The main events on Thursday’s regional calendar will be policy decisions by the Bank of Korea and Bank Indonesia. According to Archyde.com polls, both banks are expected to maintain their interest rates, before easing policy during the second quarter of next year.
Here are the main developments that could steer the markets on Thursday:
– Decision on interest rates in South Korea
– Decision on interest rates in Indonesia
– Several Fed officials speak, including President Jerome Powell.
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