By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Investors are no doubt relieved that disinflationary pressures appear to be spreading across many parts of the world, but there were some warnings on Tuesday against the complacency they may have in mind until Wednesday.
Australia’s central bank adopted an aggressive tone in its policy statement, some US Federal Reserve officials expressed similar caution about inflation and global oil prices extended their recent rise to the highest level in seven weeks.
That wasn’t enough to quell the general optimism pervading global markets – Asian stocks posted solid gains, Nvidia became the world’s most valuable publicly traded company, and the S&P 500 and Nasdaq reached new highs – but it was a reminder that markets are not unique. -bet.
Momentum has also cooled, in part, due to disappointing US retail sales figures, which suggest growth in the world’s largest economy is slowing – the dollar and Wall Street barely moved and Treasury yields fell. .
Asian markets could struggle for direction on Wednesday. Trade figures from Japan and Indonesia, current account data from New Zealand and surveys of Japan’s tankan companies are highlights on the regional economic calendar.
The New Zealand dollar could follow the example of Reserve Bank of New Zealand chief economist Paul Conway, who will give a speech on inflation.
Swaps markets are betting on 35 basis points of RBNZ easing this year and a further 90 to 100 basis points next year. That’s significantly more than the Reserve Bank of Australia, which is only expected to cut rates by 50 basis points by the end of next year.
The Australian dollar was one of the best performing G10 currencies on Tuesday after the RBA left its cash rate unchanged at 4.35%, as expected, but emphasized the need to watch inflation.
Japan’s yen lies in and around the “intervention zone” of 158.00 per dollar to 160.00 per dollar, where Tokyo has recently intervened on two occasions to prevent it from weakening further.
The Bank of Japan will be more cautious than most about the inflationary effects of the weak exchange rate and oil, which has risen more than 10% in the last two weeks.
Meanwhile, Japanese lender Norinchukin Bank will sell more than $63 billion of its holdings in U.S. and European government bonds during the year ending March 2025, Nikkei reported.
Norinchukin will do this as part of the bank’s efforts to “drastically change the management of its portfolio,” Nikkei said, citing the bank’s CEO.
It will be interesting to see what effect, if any, this will have on bonds sold and the yen. Japan is the largest foreign holder of US Treasury bonds and the largest creditor country in the world – the repatriation of a small part of these holdings could move world markets.
Here are the key developments that could provide more direction for markets on Wednesday:
– Japan Trade (May)
– Tankan research in Japan (June)
– RBNZ’s Conway speaks
(Reporting by Jamie McGeever; Editing by Josie Kao)
