By Jamie McGeever
A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.
As the week gets underway, asset markets across Asia yet again will be dominated by key economic indicators, market- and growth-supportive policy steps and diplomatic signals from China.
Asian markets also will get their first chance on Monday to react to the Jackson Hole speeches from the world's most powerful global policymakers last Friday, Jerome Powell, Christine Lagarde and Kazuo Ueda, although trading will be lighter than usual with UK markets closed for a holiday.
Looking at the Asian economic calendar this week, purchasing managers index reports for several countries - including China - will give a first glimpse into how activity fared in August. GDP data from India and inflation figures from Indonesia and Vietnam are also on tap.
The biggest market-mover of all these will probably be China's services and manufacturing PMIs later in the week. Investors - and policymakers - will be desperate for signs that the economy is picking up, but the forecast is for yet another month of weakness.
Figures this weekend showed that profits at China's industrial firms fell 6.7% in July from a year earlier, extending this year's slump to a seventh month, and year-to-date earnings shrank 15.5% compared with the same period last year.
In their latest effort to try and reverse the malaise, Chinese authorities this weekend halved the stamp duty on stock trading. The move, effective Monday, will see a 0.1% cut in the duty on stock trades "in order to invigorate the capital market and boost investor confidence".
Stock exchanges have also lowered their margin financing requirements, according to the China Securities Regulatory Commission.
This comes as U.S. Commerce Secretary Gina Raimondo arrived in Beijing on Sunday for a four-day visit aimed at boosting business ties between the world's two largest economies. Relations between the two superpowers are near rock-bottom.
Asian stocks start the week on a slightly better footing than recent weeks, but not much. The MSCI Asia ex-Japan index snapped a three-week losing streak but the rise of only 0.2% was the smallest since November, an even more underwhelming rebound after a cumulative 10% slide in the previous three weeks.
The Asian market headwinds are strong and clear - financial conditions are tightening sharply, in large part due to the steady rise in U.S. Treasury yields.
According to Goldman Sachs's financial conditions indexes, global, emerging market and Chinese financial conditions last week hit their tightest levels this year.
Higher U.S. yields and a stronger dollar may be justified from a fundamental perspective but the dollar has appreciated for six consecutive weeks and the two-year U.S. yield is up 13 out of the last 16 weeks.
Time for a pause?
Here are key developments that could provide more direction to markets on Monday:
- Australia retail sales (July)
- U.S. Fed's MIchael Barr speaks
- Euro zone money supply (July)
(By Jamie McGeever; Editing by Diane Craft)
