Morning Bid: Tightest financial conditions this year bite. Financial markets journalist Jamie McGeever previews the day ahead in Asian markets.
Concerns that last week’s share selloff might worsen, tightening banking conditions, and a deluge of economic data from China this week have investors bracing for a tense beginning in Asia on Monday.
There seems to be little noticeable effect on the market from the G20 conference in India, and U.S.-China tensions are expected to dominate politically influenced trade. The revelation that Beijing had barred government workers from using iPhones at work led to a 6% drop in Apple’s market worth last week, wiping out $180 billion.
General market confidence is low. The MSCI World Index, the S&P 500, and the MSCI Asia ex-Japan Index dropped by more than 1% last week, while the Nasdaq dropped by 2%.
Stock market volatility is expected to increase in what has always been a tumultuous month due to rising interest rates, rising bond yields, and a strong currency.
Goldman Sachs’ real-time indices show that both China and developing markets, as well as the global economy as a whole, are experiencing the tightest financial circumstances since last November.
Traders are on high alert as the dollar hits a six-month high and Asian currencies such as the Indian rupee, the Philippine peso, and the Thai baht all fall to their lowest levels of the year.
Key economic figures throughout the region, such as India’s trade and inflation, Australia’s unemployment rate, Indonesia’s retail sales, and Japan’s industrial output and equipment orders, might influence currency prices this week.
This week, China’s economic statistics will be front and center. Beijing often releases crucial indications in concentrated spurts, dubbed the “Chinese data dump,” but this one is especially weighty.
On September 15th, we may expect reports on the monetary base, lending, social finance (a broad indicator of economic credit and liquidity), retail sales, manufacturing output, unemployment, housing prices, and fixed asset investment.
This comes after data on inflation at both the production and consumer levels showed persistent disinflationary pressures on Saturday. The annual rate of change in PPI was negative for the eleventh month in a row, while the annual rate of change in CPI was just 0.1%, falling short of the predicted 0.2% gain.
By the end of the week, the Chinese economy’s status and the magnitude of the challenge confronting the government to deliver the required monetary and fiscal stimulus to keep Beijing’s objective of 5% GDP growth this year in sight will be clearer.
However, the yuan’s 16-year low adds a layer of complexity. Additional policy loosening threatens a negative cycle of currency devaluation, asset market weakness, and capital flight.
Monday’s markets may get more guidance from the following important developments:
- Production at Malaysia’s factories in July
- Money supply in Japan in August
- Tender of U.S. Three-Year Notes
