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© Reuters. FILE PHOTO: A man walks in the Central Business District on a rainy day, in Beijing, China, July 12, 2023. REUTERS/Thomas Peter//File Photo
By Jamie McGeever
(Reuters) – The day ahead in Asian markets promises to be eventful. Invest in Asia with caution following a late slide on Wall Street that took the shine off earlier figures that indicated a cooling trend in global inflationary pressures.
Thursday’s highlights in the regional economic and policy sphere include the Indonesian central bank’s latest policy decision, consumer price inflation and trade figures from Hong Kong, and producer price inflation data from South Korea.
The decline in UK inflation last month hammered gilt yields and strengthened the growing opinion that major central banks have substantial room to cut interest rates next year. On a more positive note, U.S. consumer confidence experienced a significant rise to a five-month high, fueling the ‘Goldilocks’ and ‘soft landing’ trend for the global risk rally.
The 10-day worldwide stock market rally came to a halt due to a sharp reversal in the last hour of trading on Wall Street, causing a 0.7% slump, marking the biggest decline in two months. The three main U.S. indexes also recorded their biggest daily losses since October.
If the negative trend continues into the Asian market on Thursday, the underperformance of emerging market and Chinese markets is expected to persist. The Shanghai blue chip CSI 300 index fell over 1% on Wednesday and is on course for a sixth straight weekly loss, which would be its worst weekly run in 12 years, and a record fifth consecutive monthly loss.
The big picture remains challenging – deflation is taking hold, the huge property sector is imploding and the growth outlook is questionable at best.
In Hong Kong however, the story is different. Consumer price inflation has been on the rise, reaching a year-high of 2.7% in October while the month-on-month rate rose to a two-year high of 1.0%.
Bank Indonesia is expected to keep its benchmark seven-day reverse repo rate steady at 6.00% for a second month.
People expect the first rate cut to be in the third quarter of 2024. But with inflation well-behaved, the rupiah ticking up, and the Fed forecast to start cutting U.S. rates pretty soon, BI may move well before that.