by Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets from financial markets columnist Jamie McGeever.
Barring a drop of 1.5% or more on Friday, Asian shares are about to post their first weekly gain in four, but will this be a turning point or just a temporary lifting of gloom?
The answer will begin to emerge next week as investors make their verdict on what emerges from the Federal Reserve’s Jackson Hole symposium, particularly Chairman Jerome Powell’s speech on Friday.
The latest Tokyo inflation figures for July topped Asia’s economic data calendar on Friday, providing insight into Japan’s national inflation picture and the potential effects of Bank of Japan policy in the coming months.
Market mood in Asia to be cautious on Friday – Wall Street sold off sharply on Thursday, the dollar hit a 10-week high with its biggest gain in a month, and investors are reluctant to get too excited before then . Powell’s comments.
The MSCI Asia Pacific ex-Japan index rose 1.5% on Thursday, its best day in a month. But despite this upheaval, August has been a tough month and the index is on course for its sharpest monthly decline since September last year.
Broadly speaking, Asia-Pacific stocks look reasonably priced right now, trading roughly in the middle of their long-term ranges and standard deviation levels. Indian shares are by far the most expensive, and China’s are the cheapest.
China’s economic, market and policy challenges this year have been well documented, so stocks are cheap for good reason. There’s no sign that these issues will be fixed anytime soon, so a good market rally like Thursday’s will probably remain the exception rather than the rule.
Foreign investors were buyers of Chinese shares on Thursday for the 13th straight day, according to Stock Connect data, as officials in Beijing hope a long run of outflows will not be repeated.
Tech stocks may come under additional pressure after Thursday’s Nasdaq plunge of 1.9% edged long-term bond yields slightly, but Nvidia managed to close in positive territory. Just now.
On Friday, the macro focus in Asia turned to Tokyo inflation. For the first time since September last year, July’s annual rate is being seen below 3%.
The dilemma for Japanese policymakers runs deep. National core inflation has exceeded the central bank’s 2% target for 16 consecutive months, as companies bear the burden of higher import costs partly due to a weaker yen.
Worried about damaging a fragile economy, the BOJ has stressed its resolve to keep interest rates extremely low, while it decided last month to raise a cap on long-term bond yields.
Here are the key developments that could provide more direction to the market on Friday:
– US Fed’s Jackson Hole Symposium
– Japan Tokyo CPI Inflation (Aug)
– Malaysia CPI Inflation (July)
(By Jamie McGeever; Editing by Josie Cao)