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By Jamie McGeever
(Reuters) – A look at what lies ahead for Asian markets.
Asia enters the last full trading week of 2024 with the release of the monthly ‘China data dump’ on Monday, and with investors leaning towards maintaining the stock market bull run as central banks around the world enter into mode of flexibility.
Several G10 central banks last week cut interest rates or, in the case of Australia, signaled they might do so soon, and China’s authorities pledged to delve even deeper into the territory of monetary and fiscal stimulus.
This helped boost risk appetite, despite the inclination to take chips off the table before the end of the year and with Wall Street at all-time highs.
Another wave of decisions from G10 central banks, including from the Federal Reserve, will go a long way to determining whether that continues this week. A quarter-point cut by the Federal Reserve is almost certain, based on futures market prices, while in Asia, the focus will be on the Bank of Japan.
The Bank of Japan is going in the other direction, slowly “normalizing” its policy after years of zero interest rates. Could last week’s better-than-expected ‘Tankan’ survey of business conditions seal a rate hike this week?
Economist Phil Suttle thinks that’s how it should be.
“The question now is whether the Bank of Japan has the confidence to take the measure or whether… (Governor Kazuo) Ueda might prefer to wait (for what?). Importantly, rate normalization would be presented as a success, not a problem,” Suttle wrote on Friday.
Meanwhile, the South Korean won could come under further selling pressure following the impeachment of President Yoon Suk Yeol on Saturday, the latest twist in a notable crisis sparked by his surprise decision to impose martial law on December 3.
Monday’s economic calendar in Asia is packed with releases that could affect the market, especially the set of Chinese economic indicators, including industrial production, fixed asset investment, retail sales, housing prices and unemployment.
This comes days after Beijing said it will increase the budget deficit, issue more debt and ease monetary policy to support growth. China is bracing for more trade tensions with the United States, and U.S. Treasury Secretary Janet Yellen told Reuters on Friday that Washington will not rule out sanctions on banks and greater restrictions on “dark fleet” tankers.
Investors have welcomed Beijing’s stimulus announcements since September. But only time will tell if they will pull the economy out of the crisis and deflation in the real estate sector, reactivate growth and attract investment back to the country.
