2023-10-10 21:45:00
Jamie McGeever, columnist specializing in financial markets, offers you an overview of the Asian markets for the day ahead.
A fall in U.S. bond yields, after another Federal Reserve official signaled that the central bank’s interest rate hike cycle is over, will put Asian markets on a positive footing on Wednesday, despite a surge in stress in the Chinese real estate sector. Investors in the region should also pay attention to key indicators of economic activity in Japan and current account figures in South Korea, and the annual meetings of the IMF and the World Bank in Morocco are sure to make headlines.
But Atlanta Fed President Raphael Bostic’s remarks that he thinks the Fed is done raising rates will help Asian markets pick up on Wednesday where global markets left off on Tuesday. “I think we don’t need to raise rates anymore,” Mr. Bostic said, following the dovish path charted by two of his Fed colleagues on Monday. Minneapolis Fed President Neel Kashkari also struck a similar tone Tuesday, leading investors to believe the Fed’s “pivot” is underway.
This doesn’t necessarily mean rates will be lowered anytime soon, but it helps rule out further increases. All things being equal, this should lower the dollar and US yields, boost risk appetite and lift Asian and emerging markets. The turnaround in sentiment also coincides with a decline in oil prices and a reduction in the flight to safety on Tuesday. The immediate impact of the violence in Israel and Gaza on financial markets appears to be fading – gold has also slipped.
The main event on the Asian economic calendar is the latest monthly release of Japan’s “tankan” indices, the central bank’s widely-watched surveys of activity in the manufacturing and services sectors. The International Monetary Fund released its latest global growth forecast on Tuesday, and among the highlights were downward revisions to China’s GDP growth outlook, to 5.0% in 2023 and 4.2% in 2024 .
IMF chief economist Pierre-Olivier Gourinchas said “robust action” was needed to clean up China’s real estate sector and that while authorities had taken some steps, there was still work to be done. The sector suffered another blow on Tuesday after Country Garden warned of its inability to meet its offshore debt obligations. China’s largest private lender could add to the growing list of defaulting property developers and pave the way for one of the country’s largest debt restructurings.
Chinese stocks fell for the third straight session on Tuesday, and have now fallen 16 times in the last 20. The Hang Seng Chinese A property index has only risen in three sessions out of the last 18.
Here are the main developments that could guide the markets on Wednesday:
– IMF and World Bank meetings in Marrakech (Morocco)
– Fed’s Bowman, Bostic, Waller and Collins speak
– Japanese “tankan” survey (October)
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