Marketmind: the calm before the storm

By Jamie McGeever

(Reuters) – A preview of the day ahead in Asian markets from Jamie McGeever.

It looks like a quiet start to the week in Asia on Monday, but make no mistake – it may be the calm before the storm.

A series of regional economic indicators, including Japanese unemployment and PMIs from China, Australia and India, as well as US non-farm payrolls and US interest rate decisions , in the Eurozone and the UK, will surely provide fireworks later in the week.

With this in mind, investors could choose on Monday to reduce their exposure to the glut of event risk, particularly as we approach the end of the month and given the magnitude of the rise in equities since the start of the year. .

The MSCI Asia ex-Japan index is at a nine-month high and up more than 30% from the October low. It has risen in 11 of the past 13 weeks and is on track for an 11% monthly gain.

GRAPH-Global Markets in 2023

This comfortably outperforms the S&P 500, Eurozone and UK equities, Japan’s Nikkei 225 and the MSCI World Index, so a little profit taking could be on the cards.

In India, Gautam Adani faces a critical day on Monday with his flagship company’s second day of $2.5 billion auction, eclipsed by a $48 billion rout in the Indian billionaire’s shares sparked by the report from a US short seller.

China is reopening after the Lunar New Year holiday, so trading volumes in Asia will return to something close to normal. Just in time for a potentially choppy 24 hours on Wednesday and Thursday when the Federal Reserve, European Central Bank and Bank of England announce their latest policy decisions.

Debate over US recession or soft landing, and Fed ‘pivot’ or ‘higher for longer’ may gain more clarity after Fed Chairman Jerome Powell’s press conference , Wednesday. Right now, investors’ glasses are half full.

GRAPH-Global stocks add $4 trillion year-to-date

Wall Street’s “fear index” – the VIX volatility index – fell below 18.0 on Friday for the first time in more than a year, and perhaps a little under the radar, volatility the US bond market is now at its lowest since last June.

On the Asian data front this week, China’s purchasing managers’ indices will provide the most up-to-date snapshot of how the region’s largest economy is emerging from zero-COVID restrictions, while unemployment figures and retail sales in Japan will be released on Tuesday.

There is a deluge of Japanese earnings reports this week, coming from corporate titans such as SoftBank, Sony, Sumitomo and financial institutions Mizuho, ​​Daiwa and Mitsubishi UFJ.

Three key developments that could give markets more direction on Monday:

– New Zealand Trade (December)

– GDP of Germany (Q4)

– Eurozone Sentiment Indicators (January)

(Reporting by Jamie McGeever in Orlando, Florida; Editing by Lisa Shumaker)

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