Written by Jamie McGeever
(Reuters) – Future outlook for the Asian market.
Investor sentiment in Asia is expected to start the week on a positive note on Monday, boosted by last week's upward momentum in global stocks, calming currency markets and easing overall financial conditions.
Key events on the regional calendar include China's services PMI figures and Indonesia's Q1 GDP data, while Chinese President Xi Jinping meets with President Emmanuel Macron and European Commission President Ursula von der Leyen I am visiting Paris for this purpose.
Investors will be hoping the increased risk appetite continues this week following Federal Reserve Chairman Jerome Powell's relatively dovish steering of the U.S. interest rate outlook on Wednesday.
On Friday, Wall Street and the MSCI World index hit three-week highs, the S&P 500 index hit its highest since February 22, while the MSCI Asia ex-Japan index rose to its highest since February last year. .
The rise in Asian stocks from bottom to top over the past two weeks is an impressive 8%.
U.S. earnings are solid overall, corporate guidance is generally bullish, the Federal Reserve appears reluctant to raise rates again, and signs of softening economic data keep hopes for a rate cut this year.
According to the Goldman Sachs Financial Conditions Index, financial conditions in global and emerging markets have eased significantly over the past week and are now the most relaxed since March 22.
Liquidity will be lower than usual on Monday as London markets are closed for the holiday. Could the Bank of Japan use this to tap into the foreign exchange market?
The dollar fell almost 5% against the yen last week following two allegations of Japanese interference, on Monday and Wednesday.
Hedge funds have reduced short positions in the yen, which reached historic highs in the week ending last Tuesday, U.S. futures market data showed. This was probably fueled by the sharp rise in the yen, and it's not unreasonable to think that some of the bubbles in the pan-Asia bear/dollar bull trade have also dissipated.
Indonesia's gross domestic product (GDP) statistics on Monday showed the economy is expected to grow at an annualized rate of 5.00% in the first quarter, compared with Finance Minister Sri Mulyani Indrawati's forecast of 5.17%, according to a Reuters poll. It was slightly lower than that.
However, due to seasonal factors, GDP is expected to contract by 0.89% compared to the previous three months.
Indonesia's central bank unexpectedly raised interest rates last month to support the rupiah, which has fallen to a four-year low. Bank Indonesia's seven-day reverse repo rate is currently 6.25%, the highest since it became the main policy rate in 2016.
On the political and diplomatic front, trade will be high on the agenda for China's Xi Jinping on his first visit to Europe in five years, with France's Macron expected to urge him to reduce trade imbalances.
Here are the key developments that could give further direction to the market on Monday:
– China Caixin Services PMI
– Indonesia GDP (1st quarter)
– Chinese President Xi Jinping visits Europe
(Reporting and writing: Jamie McGeever; Editing: Diane Craft)
