Sign up for Reuters newsletters

A look at the day ahead in Asian and global markets

By Jamie McGeever, Columnist, Global Finance & Markets

Data refreshes every time you open this email. For more Asian market news, click here. Please send any feedback to morningbid@thomsonreuters.com” rel=”noopener” style=”text-decoration: underline; color: #0274b6;”>morningbid@thomsonreuters.com.

The start of the trading week has shown that it is becoming increasingly difficult to navigate, never mind predict, markets right now, with many asset correlations being weakened by strong cross-currents of news flow and drivers.

Some markets, like the S&P 500 and Nasdaq, are taking on a momentum of their own, and others, like the U.S. Treasury market and the dollar, are sending contradictory signals.

Rising U.S. bond yields on Monday failed to support the dollar, the relentless tech and AI boom delivered record highs for two of Wall Street’s three main indexes yet again, while a near-2% slump in Japan’s Nikkei came out of the blue.

This is the rather fragmented backdrop to the Asian market open on Tuesday, which is further complicated by the political turmoil in France that is rocking French assets and markets across the euro zone.

An ibis bird perches next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz

Will investors in Asia take their cue on Tuesday from higher Treasury yields, the lower dollar, the U.S. tech frenzy or the ongoing deterioration in Chinese data and sentiment? 

The economic calendar across the continent is light, but the main event is a big one – the Reserve Bank of Australia‘s interest rate decision, and guidance from the accompanying statement and press conference from Governor Michele Bullock. 

Graphics are produced by Reuters.

Economists polled by Reuters are unanimous in their view that the RBA will hold its cash rate at 4.35% for a fifth straight meeting. With inflation remaining above the central bank’s 2% to 3% target since late 2021 and the jobless rate easing to 4%, an early rate reduction seems unlikely.

A near 90% majority, 38 of 43, predicted interest rates to remain unchanged next quarter, followed by a 25 basis point cut to 4.10% in the final quarter of this year.

Australian rates markets are even more hawkish – traders are pricing in only 15 basis points of easing this year, and barely 50 bps in total by the end of 2025.

Excluding the Bank of Japan, which is in the early stages of tightening policy, that’s among the most hawkish pricing for any G10 central bank. 

In China, meanwhile, stocks are at a two-month low and the yuan is its weakest this year after a weak batch of data on Monday – especially house prices – did little to lift the economic gloom.

Trade tensions are intensifying too. China has opened an anti-dumping investigation into imported pork and its by-products from the European Union, a tit-for-tat response to curbs on its electric vehicle exports.

Warren Buffett’s Berkshire Hathaway, meanwhile, has trimmed its stake in China’s BYD, the world’s largest seller of electric vehicles. The change in stake is tiny, but potentially symbolic of foreigners’ angst at the brewing trade wars.    

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Sponsors are not involved in the creation of newsletters or other Reuters news content.

Advertise in this newsletter or on Reuters.com

Morning Bid is sent every morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this newsletter? Unsubscribe here.
To manage which newsletters you’re signed up for, click here.

Reuters Terms & Conditions and Privacy Statement