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A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.
Asian markets go into the final trading day of the week unable to escape the downbeat mood rooted in worries over high U.S. bond yields, a rampant dollar, China’s economic funk and now the potential inflationary impact from spiking oil prices.
Brent crude oil is now higher than it was a year ago, the first time since January that year-on-year price changes have been positive. In other words, all else equal, oil is now contributing to headline inflation rather than diluting it.
The highlights of Friday’s regional economic data calendar include an expected downward revision to Japanese second quarter GDP growth, and the latest trade, current account and bank lending data from Japan which could all move the beleaguered yen.
Investors in Asia may not be able to fully switch off at the close of business on Friday either – the G20 leaders summit in New Delhi opens on Saturday, and Chinese consumer and producer price inflation figures are also released the same day.
Equities and risk assets will be on the defensive at the open on Friday after a down day on Thursday, even though Treasury yields and oil eased off a bit from their recent highs.
New York Fed President John Williams said it is an ‘open question’ whether the Fed will hike rates again, but strong jobless claims data on Thursday put rates traders in a more hawkish mood and the dollar hit its highest level since March.
China remains a drag on sentiment and market performance.
The onshore yuan fell on Thursday to its weakest since December 2007, nudging 7.33 per dollar and intensifying the pressure on authorities to arrest its decline. Unfortunately for Beijing, it also highlights the limited options available.
The sputtering economy needs stimulus, but any meaningful policy easing will almost certainly push the yuan even lower. The weaker the yuan gets, the greater the risk of investors pulling money out of China and exacerbating a doom loop of FX depreciation, asset market weakness and capital flight.
The G20 leaders’ summit opens in New Delhi on Saturday. U.S. President Joe Biden will be there and Chinese President Xi Jinping won’t, a situation that won’t do anything to improve the delicate and deteriorating ties between the two superpowers.
The latest twist – and potent symbolism – is Beijing’s crackdown on state employees using Apple iPhones at work. Apple shares fell 2.9 per cent on Thursday, dragging Wall Street mostly lower.
World leaders and their entourages will no doubt be busy, but any shopping trips they can squeeze in will be worth it – India’s rupee ended at a record closing low on Thursday, despite probable central bank intervention, at 83.21 per dollar.
Here are key developments that could provide more direction to markets on Friday:
– Japan GDP (Q2, revised)
– Japan current account (July)
– Japan bank lending (August)
(By Jamie McGeever; Editing by Josie Kao)
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