Written by Jamie McGeever
(Reuters) – Future outlook for the Asian market.
Investors in Asia, who had been hoping for some relief from soaring U.S. bond yields and a pervasive dollar strength, were dejected by Federal Reserve Chairman Jerome Powell’s comments on Tuesday and are set to enter Wednesday’s trade on high alert. Probability is high.
“Recent numbers clearly don’t give us much confidence and, if anything, indicate that it will likely take longer than expected to achieve that confidence,” Powell said in Washington. It signaled to the world that the rate was not falling towards the central bank’s 2% target. The need to meet the target as quickly as expected will likely keep interest rates high for a longer period of time.
“Longer to go” may also apply to the U.S. dollar, bond yields and financial conditions indexes, but it’s a suboptimal combination for already hot Asian assets.
Chinese stocks fell 1% on Tuesday, Japanese stocks and the pan-Asia ex-Japan stock benchmark fell 2%, and currencies across the continent fell, compounded by the yen’s spiraling decline towards 155.00 yen to the dollar. are doing.
The Japanese government has so far taken no action regarding the yen, likely frustrating policymakers across Asia. A stronger dollar is sure to emerge from talks between finance ministers and central bank officials attending the IMF and World Bank’s spring meetings.
The IMF on Tuesday significantly revised its growth outlook for the United States higher, saying stronger-than-expected growth in China in the first quarter could prompt an upward revision to the outlook.
In theory, these are positive developments for the Asian market. And Wall Street’s resistance in the face of another spike in US Treasury yields on Tuesday could still bring some optimism to Asian trading on Wednesday.
However, tensions in the Middle East and patchy first-quarter US earnings could dampen this picture.
The MSCI Asia index excluding Japan has fallen 4% in the past four days, hitting its lowest point in two months. Is it time to pause, or is the selloff gaining momentum?
The same question will naturally arise regarding the Japanese yen, which is hitting new 34-year lows almost every day.
The latest Japanese trade statistics and Reuters’ Tankan survey of manufacturing and non-manufacturing business conditions will be released on Wednesday, but the yen is unlikely to move much.
Apart from direct intervention, regarding domestic factors that could impact the yen, investors will be keeping an eye on inflation data and comments from Bank of Japan Governor Kazuo Ueda in Washington later in the week.
Perhaps the highlight of Wednesday’s thin Asia-Pacific economic calendar will be New Zealand’s inflation.
Annual inflation is expected to slow to 4% in the first quarter from 4.7% in the final three months of last year, according to a Reuters poll. This is the lowest since the second quarter of 2021.
Here are the key developments that could give further direction to the market on Wednesday:
– IMF/World Bank Conference in Washington
・Japanese trade (March)
– New Zealand inflation (1st quarter)
(Written by Jamie McGeever)
