2024-09-26 05:00:39
Asian markets are poised for a possible slowdown today after a period of gains as the initial impact of China’s significant economic stimulus appears to be waning. This comes on the back of a lackluster performance on Wall Street on Wednesday, where higher US bond yields and a stronger dollar dampened investor sentiment, which showed its biggest rise in a month.
Japan faces pressure, entering today’s session at a three-week low, trading near 145.00 per dollar. This financial backdrop is contributing to a cautious approach from investors, who are also dealing with cloudy prospects for global growth and politics. Recent weak US consumer confidence data has raised concerns, casting doubt on the country’s smooth economic trajectory.
In Europe, the economic situation appears to be easing, with economists at HSBC revising their forecasts for the European Central Bank, now predicting cuts of 25 basis points at each meeting until April 2025, which could push the deposit rate reduce benchmark to 2.25%.
Despite these broader concerns, Chinese stocks rose on Wednesday, with shares rising 1.5% to a two-month high, although they ended the day near their lowest point. There has been a spectacular rally in Hong Kong stocks, with the Hang Seng index rising 15% in just two weeks, and the MSCI Asia ex-Japan index reaching its highest point since February 2022. However, the question whether those markets are ready for a break from their upward trajectory.
The euro’s decline and rising US bond yields helped the dollar recover some of its recent losses, with the dollar index posting a 0.4% gain on Wednesday, its biggest daily gain in a month.
However, the dollar had mixed results against emerging market currencies, while the Chinese dollar continued its six-day rally against the greenback, marking its longest winning streak since January of the previous year. The offshore yuan also made a significant move, breaking the 7.00 barrier per dollar for the first time since last January.
This appreciation of the yuan against the US dollar, which has exceeded 3% since August 5, is particularly significant given China’s tight control over its exchange rate.
Looking ahead, today’s economic indicators from Asia include manufacturing data from Thailand, industrial production numbers from Singapore and trade statistics from Hong Kong. Policy insights are also expected, with the Bank of Japan due to release the minutes of its July 30-31 policy meeting, and the Reserve Bank of Australia publishing its Financial Stability Review.
These developments and data releases will be closely watched as they may provide further guidance for Asian markets amid the current environment of uncertainty and adjustment.
Reuters contributed to this article.
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