by By Jamie McGeever
(Reuters) – A look at the day ahead at Asian markets from Jamie McGeever.
Monday looks like a quiet start to the week in Asia, but don’t be fooled – it could be the calm before the storm.
A range of regional economic indicators, including Japan’s unemployment rate and PMIs from China, Australia and India, as well as US nonfarm payrolls and interest rate decisions in the US, Eurozone and UK are sure to spark fireworks later in the week.
In that light, investors may want to reduce their exposure to the excess of event risk on Monday, especially as the end of the month approaches and given the rise in stocks since the turn of the year.
The MSCI Asia ex-Japan index is at a nine-month high, up more than 30% from its October low. It is up in 11 of the past 13 weeks and is on course for an 11% monthly gain.
GRAPHIC-Global Markets in 2023 https://fingfx.thomsonreuters.com/gfx/mkt/zjvqjerrgpx/Pasted%20image%201674813566094.png
That’s well ahead of the S&P 500, Eurozone and UK stocks, Japan’s Nikkei 225 and the MSCI World index, so some profit-taking is likely.
In India, Gautam Adani faces a critical day on Monday, with his flagship company’s second day of bidding for $2.5 billion in share sales being overshadowed by a $48 billion loss in the Indian billionaire’s shares, fueled by a report from a US short seller.
China will reopen after the Lunar New Year holiday, so trade volumes in Asia will return to normal. Just in time for a potentially turbulent 24-hour period on Wednesday and Thursday as the Federal Reserve, the European Central Bank and the Bank of England announce their latest policy decisions.
The debate over the US recession or a soft landing and the Fed’s “pivot” or “longer up” may gain some clarity following Fed Chairman Jerome Powell’s press conference on Wednesday. At the moment, investors’ glasses are half full.
GRAPHIC-World Stocks Add $4 Trillion Since Start Of Year https://fingfx.thomsonreuters.com/gfx/mkt/znvnbzyjavl/Pasted%20image%201674844455175.png
Wall Street’s “fear index” – the VIX volatility index – fell below 18.0 for the first time in more than a year on Friday, and perhaps a little under the radar, US bond market volatility is now the lowest since last June .
On the Asian data front, this week’s Chinese purchasing managers’ indices will provide the most up-to-date snapshot of how the region’s largest economy emerges from zero-COVID restrictions, while Japan’s unemployment and retail sales figures are due on Tuesday.
There’s been a deluge of Japanese earnings reports this week, from big companies like 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)
– Germany GDP (Q4)
– Eurozone sentiment indicators (January)
(Reporting by Jamie McGeever in Orlando, Fla.; Editing by Lisa Shumaker)
