July 24 (Reuters) – Financial markets columnist Jamie McGeever takes a look at the day ahead in Asian markets.
Next week could be pivotal for the financial market outlook for the rest of the year, as the G3 central banks deliver their latest policy decisions and the Politburo of China’s ruling Communist Party meets to discuss the economy.
The United States Federal Reserve, european central bank and bank of japan decisions and press conferences are held during the 48-hour period from Wednesday to Friday, with China’s Politburo expected to start its meeting on Friday.
If that weren’t enough, the Purchasing Managers’ Index figures will give the first indications of how economies fared in July. US earnings season progresses with Meta Platforms, Microsoft and Alphabet among the big names reporting.
Dovish signals from the Fed Chairman Jerome Powell it would likely boost risk appetite and lift global stock markets. Dollar and US bond yields are also likely to come under downward pressure, often bullish triggers for Asian and emerging markets.
Investors in Asia have to wait until Friday for the two big pieces of the week.
More than three-quarters of economists polled by Reuters expect the BOJ keep policy unchanged, including your performance control plan. BOJ Governor Kazuo Ueda has signaled his determination to maintain massive monetary stimulus, despite inflation persistently exceeding the bank’s 2% target.
In a symbolic development last week, Japan’s annual rate of headline consumer inflation surpassed comparable US inflation for the first time since 2015. But the scars from the BOJ’s battle against deflation run deep, so investor hopes and an end to super-loose policy are further delayed.
It’s a different story in China: the economy and markets are seriously underperforming, growth forecasts are being cut, and the big danger is deflation, not inflation.
The central bank has been reluctant to ease policy because the already weak yuan could come under even more selling pressure, so investors are pinning their hopes on a fiscal boost from Beijing. And it will have to be a major boost.
Measures announced Friday to help boost auto and electronics sales failed to impress investors and foreigners are shying away from China’s financial assets even though they are relatively cheap.
But the economic, financial, political and social challenges facing Beijing are such that chinese stocks it can get even cheaper before foreign investors start buying in droves again.
Monday’s economic data calendar and potential market movers in Asia will be the PMIs from Japan and Australia, and the latest inflation figures from Malaysia and Singapore.
Malaysian inflation is expected to fall to 2.4% in June, the lowest since April last year, from 2.8% in May. Singapore’s inflation is forecast to fall to 4.55%, the lowest since February last year, from 5.10%.
Here are key developments that could provide more direction for markets on Monday:
– Japan PMI (July)
– Australian PMI (July)
– Singapore inflation (June)
By Jamie McGeever; Edited by Diane Craft
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