© Reuters FILE PHOTO: Pedestrians wait to cross a road at an intersection near Shanghai’s giant stock indexes in Shanghai, China, Aug. 3, 2022. REUTERS/Aly Song
(Reuters) – Take a look at Jamie MacGyver’s day on Asian markets
Asian markets should open the week on a positive note following a strong end to global equities last week, but with more caution ahead of Tuesday’s US inflation data.
August’s Consumer Inflation Report will be critical to the Fed’s interest rate decision later this month and therefore the tone and direction of global markets.
Recent voices from Fed officials suggest rates will continue to rise sharply. Bond and equity markets take note – the two-year Treasury yield rose to a 15-year high of 3.575% on Friday and US interest rates fell 4%.
However, stocks have shown some resilience. The MSCI world index rose 1.7% on Friday, the best day in a month, and closed the week 2.6%, the first weekly increase in four. The Nasdaq jumped 4% last week.
Temporary relief from the tide of rising interest rates?
Monday’s calendar of Asian economic data is light – India’s inflation is the only major release – but investors will have China’s industrial production, retail sales, unemployment, direct investment and unemployment figures to digest in the coming week.
None of these would account for the recent lockdowns, but they could still be useful as a gauge of how weak China’s economy was even before they were implemented.
China’s economy eased after a policy-induced contraction in 2Q22, but Covid restrictions and the housing market picked up pace. Morgan Stanley (NYSE: ) analysts wrote on Sunday. They forecast GDP growth of just 2.8% this year.
If the yuan and yen continue to slide to new lows, investors will be on alert for FX intervention from Beijing or Tokyo. Japanese officials have warned that they are ready to defend against the yen, which fell to a 24-year low against the dollar last week.
Key developments that should give markets more direction on Monday:
India Inflation (August)
India’s Industrial Production (July)
UK Growth, Manufacturing, Trade, Industry, Services Results (July)