Morning Bid Asia: Communication breakdown
02/02/2023 21:45
By Jamie McGeever
Feb 3 (Reuters) - A look at the day ahead in Asian
markets from Jamie McGeever.
The Fed, ECB, and BoE have spoken, and the market's message is:
We hear you, but we don't believe you.
All three raised interest rates as expected this week, said
they will act again at upcoming meetings, and with varying
degrees of guidance and conviction said they stand ready to
tighten even further if inflation conditions warrant it.
But investors aren't buying it. Wall Street and world stocks
have jumped, bond yields are tumbling, and economists and rates
futures markets are scaling back central bank hiking
expectations.
Contrary to what policymakers are surely aiming for,
financial conditions are easing. Look how Germany's 10-year bond
yield reacted on Thursday to ECB president Lagarde's press
conference - down 20 basis points, one of the biggest falls
since the euro was launched in 1999.
According to Goldman Sachs, U.S. financial conditions are
the loosest since August and have eased 150 basis points since
mid-October. That's despite 225 bps of rate hikes since
September.
The falling dollar and lower Treasury yields have helped
loosen financial conditions across most of emerging Asia in
recent weeks too. Regional risk appetite remains firm, even
though a pause in the equity rally may be overdue.
The MSCI Asia ex-Japan index only has to rise around 0.7% on
Friday - not an insurmountable challenge on the back of Wall
Street's latest bounce - to post its sixth consecutive weekly
gain.
That would mark 12 increases out of the last 14 weeks, while
the MSCI World index has had only one down day in the last 10.
Remarkable runs.
Watch for outsized moves in Asian tech stocks on Friday
following the 23% surge in Meta Platforms Inc META.O shares.
Apple AAPL.O , Amazon AMZN.O and Google parent Alphabet
GOOGL.O also reported results after the U.S. close.
On the economic data front, a batch of PMI reports will give
the latest insight into the health of several key economies in
Asia, including China and India, while December retail sales
figures from Hong Kong and Singapore will also be released.
Here are three key developments that could provide more
direction to markets on Friday:
- China Caixin services PMI (January)
- India S&P Global Services PMI (January)
- U.S. non-farm payrolls (January)
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Hang Seng tech index https://tmsnrt.rs/3jtJ9by
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(By Jamie McGeever; Editing by Deepa Babington)
((jamie.mcgeever@thomsonreuters.com; +1 (407) 288-5607; Reuters
Messaging: jamie.mcgeever.reuters.com@reuters.net))