Morning Bid Asia: China focus turns back to the macro

Foxconn Technology

10/04/2023 22:45

By Jamie McGeever
       April 11 (Reuters) - A look at the day ahead in Asian
markets from Jamie McGeever.
       
Asian market trading volumes should return to more normal levels
on Tuesday as investors around the world return from the Easter
break, with Chinese inflation and an interest rate decision in
South Korea the key events in a pretty packed regional calendar.
    Australian consumer confidence will also be released on
Tuesday, along with unemployment and trade data from the
Philippines, and trade and inflation reports from Taiwan.
    There was nothing from U.S. or global equities on Monday for
traders in Asia to hang their hats on, although U.S. bond yields
and implied rates continue to inch higher on the view that the
Fed will raise rates by a quarter point on May 3.
There was more movement in currency markets, where the dollar
rose across the board and the yen sank. The Japanese currency
slumped 1% to a four-week low against the dollar following the
first public remarks from new Bank of Japan (BOJ) governor Kazuo
Ueda.
    Ueda said it was appropriate to maintain the bank's
ultra-loose monetary policy for now as inflation has yet to hit
2% as a trend, suggesting he will be in no rush to dial back its
massive stimulus.
    At the same time, the BOJ must also avoid being too late in
normalizing monetary policy, a sign he will be more open to
tweaking its controversial 'yield curve control' policy than his
dovish predecessor Haruhiko Kuroda.
    He has his work cut out.
     
     
     
Chinese stock markets, meanwhile, get a chance to recover from
Monday's 0.5% fall - the steepest in three weeks - now that
Beijing has completed its military drills around Taiwan.
    Investors can turn their attention back to the economic
data, specifically inflation on Tuesday. Producer price
inflation is expected to have fallen further in March, according
to analysts' estimates of a year-on-year decline of 2.5%, which
would be the fastest pace of deflation since June 2020.
    The annual rate of consumer price inflation is expected to
remain unchanged at 1.0%, the slowest in a year, and the monthly
rate is expected to rise to 0% from -0.5% in February.
    If these forecasts are broadly accurate, price pressures in
China would appear to be extremely benign, giving the central
bank room to loosen policy and stimulate the economy.
In South Korea, the central bank looks to have ended its
tightening cycle and will likely keep its main interest rate on
hold at a 15-year high of 3.50% on Tuesday. With the economy on
the brink of recession, it could well cut rates later this year.
        
    Here are three key developments that could provide more
direction to markets on Tuesday:
    - IMF/World Bank spring meetings in Washington
    - China PPI and CPI (March)
    - South Korea interest rate decision (seen on hold)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Chinese consumer price inflation    https://tmsnrt.rs/43jb4NA
Dollar/yen hits 4-week high    https://tmsnrt.rs/3ZWiGCI
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(By Jamie McGeever; Editing by Josie Kao)
((email: jamie.mcgeever@thomsonreuters.com;Reuters Messaging:
jamie.mcgeever.thomsonreuters.com@reuters.net))