© Reuters. FILE PHOTO: A man looks at an electric monitor displaying the Japanese yen exchange rate against the U.S. dollar and Nikkei share average outside a brokerage in Tokyo, Japan October 4, 2023. REUTERS/Issei Kato/File Photo
By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Asian markets are lacking firm direction either way, but bulls will be hoping the combination of a weaker dollar, lower U.S. bond yields and softer oil prices on Monday will provide the impetus for a more positive session on Tuesday.
Volatility across major asset classes is low – implied volatility on Wall Street is at its lowest in almost four years, global currency implied vol is the lowest since early last year, and U.S. bond vol is at a two-month low.
There are few signs of market stress. But clear ‘buy’ signals aren’t obvious either – the final trading week of November got off to a listless start, with the MSCI World and Asia ex-Japan indexes drifting 0.2% lower on Monday.
On aggregate, Asian stocks have under-performed global benchmarks this year. China’s markets, especially, have lagged, although Japanese stocks have outperformed thanks to the weak yen and a historic loosening of wider financial conditions.
Financial conditions tightened a bit last week, according to Goldman Sachs calculations, but remain broadly supportive of risk appetite – aggregate emerging market conditions are almost 100 basis points looser than they were a month ago, in large part thanks to lower U.S. yields and a weaker dollar.
Asia’s economic, policy and corporate calendars are light on Tuesday. The main economic indicator will be Australian retail sales for October. Economists expect month-on-month growth to slow sharply to just 0.1% from 0.9% in September.
The figures will be released just before Reserve Bank of Australia Governor Michele Bullock is scheduled to speak in Hong Kong on a panel jointly hosted by the Hong Kong Monetary Authority and Bank for International Settlements.
Bullock is thought to be more hawkish than her predecessor Philip Lowe which, if true, should in theory lend support to the Australian dollar.
The on Monday rose above $0.66 for the first time since Aug. 10 and was one of the biggest winners among major currencies along with the Japanese yen and New Zealand dollar.
It has risen 5% in a month, broadly in line with other G10 currencies’ gains against the greenback as traders have moved to price in the end of the U.S. tightening cycle and up to 100 basis points of Fed rate cuts in the second half of next year.
But unlike all other G10 central banks – the Bank of Japan being the obvious exception – the RBA is not expected to ease policy in 2024. Bullock’s remarks on Tuesday could shine a light on how much of an outlier the RBA will ultimately be.
Here are key developments that could provide more direction to markets on Tuesday:
– Australia retail sales (October)
– RBA Governor Bullock speaks
– Fed’s Waller, Bowman, Goolsbee, Barr speak
(By Jamie McGeever; Editing by)
