Author: Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The relief from positive inflation surprises in the US and UK this week appears to have worn off, at least as far as equity markets are concerned, even as government bond yields and the dollar continued to fall in the final trading day of the week.
Asian markets open on Friday on a mixed global backdrop. Yields are softening and Fed Governor Chris Waller again signaled his willingness to cut rates on Thursday, while US bank earnings beat expectations.
But more evidence is needed that global bonds and inflation are anything but temporary, and investors are jittery ahead of US President-elect Donald Trump’s inauguration on Monday.
Investors in Asia could therefore be forgiven for playing it safe, minimizing exposure to risky assets ahead of the weekend, especially as the three-day break in the US where markets are closed on Monday for Martin Luther King Jr. Day.
But China’s monthly ‘data dump’ falls on Friday. Beijing releases December readings for house prices, industrial production, fixed asset investment and retail sales, all of which will contribute to the big one: GDP for the fourth quarter and the full year.
Citi’s China Economic Surprises Index is currently in positive territory, lifted by a series of policy promises and market stimulus measures announced since September. But that stimulus has faded, and the index is the lowest in two months.
Can a series of indicators from Friday stop the move? It is possible that some, such as data on exports and new loans released earlier this week, are on the stronger side as businesses and households ramp up activity before Trump’s threat of tariffs takes office.
On the other hand, the broader trend suggests that negative surprises are more likely, and it is worth noting that December was characterized by strong capital outflows, sluggish equity markets and the biggest decline in bond yields since December 2008.
Investors will also be keeping an eye on the TikTok saga for signs of how chilly or otherwise U.S.-China relations are ahead of Trump’s return to the White House.
The Chinese-owned video app, used by more than 170 million Americans a month, will be banned on Sunday under a law requiring it to find a non-Chinese owner. But Trump’s incoming national security adviser said Thursday that the new administration would keep TikTok alive in the US if there was a viable deal, with a potential reprieve for the company.
Meanwhile, currency volatility in Asia is rising after two central bank policy surprises this week from South Korea and Indonesia, and as the Japanese yen gains strongly ahead of a possible rate hike by the Bank of Japan next week.
Here are the key developments that could provide more direction to markets on Friday:
– China ‘data dump’ (December)
– China’s GDP (Q4, whole 2024)
– PMI for manufacturing in New Zealand (December)
