By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Asian markets will likely tread water on Wednesday ahead of the U.S. Federal Reserve’s latest interest rate decision, guidance and economic projections later in the day, and they appear to be up to the task.
Stocks rose across the board on Tuesday, including Asian and emerging indexes, while bond yields, the dollar and key measures of volatility fell. This should support risk appetite in Asia on Wednesday as investors await the signals from Washington.
The regional economic calendar highlights include Japan’s quarterly ‘tankan’ business sentiment survey, Indian trade, South Korean unemployment, New Zealand current account data and the minutes from the Bank of Thailand’s last policy meeting.
Japan’s manufacturers’ business sentiment likely edged higher in the three months to December and service-sector sentiment is also seen firm, supported by upbeat inbound demand, according to a Reuters poll.
The closely watched survey comes as the Bank of Japan figures out when and how to move away from decades of ultra-loose policy, end ‘yield curve control’, and finally raise interest rates.
It’s a tricky path, and for markets, a volatile one. Japanese bond yields on Tuesday had one of their biggest falls this year, while the yen rose.
If the yen has been rising lately, China’s yuan is back on the slide, as expectations mount that China will have to inject more stimulus into the flagging economy.
Whether that is lower interest rates, lower reserve requirements or fiscal support, it will weigh on the currency, at least initially.
Beijing will take steps to boost domestic demand and drive an economic recovery next year, state media said on Tuesday, citing the annual Central Economic Work Conference held from Dec. 11-12.
Top leaders gathered at the forum to set economic targets for 2024. They don’t have their challenges to seek – the huge property sector is in crisis, local government debt is soaring, growth is flagging, and the economy is flirting with deflation.
Hopes for policy stimulus may be weighing on the yuan, but they’re lifting stocks – the blue chip CSI 300 share index rose on Tuesday for a third day, its best run since late October and only the second time in six months it is up three days in a row.
Asian markets may also draw support on Wednesday from Tuesday’s slide in the Wall Street ‘fear index’, the options-based VIX index of implied volatility on the S&P 500. It fell below 12.00 for the first time since January 2020.
It may not be the cleanest gauge of investors’ perception of upcoming risk for U.S. stocks and global stocks more broadly, but as long as it languishes at these levels, broader risk appetite should remain fairly well-supported.
Here are key developments that could provide more direction to markets on Wednesday:
– Bank of Thailand minutes
– Japan tankan survey (Q4)
– India trade (October)
(By Jamie McGeever; Editing by Deepa Babington)
