Monday may be too soon for animal spirits to fully return, with the BOJ and Fed decisions looming on Wednesday. On the other hand, Friday’s relief rally soothed some of the pain from what was a grueling week as Big Tech dragged stocks lower.
Asian stocks, however, didn’t see any rebound on Friday as the MSCI Asia & Pacific ex-Japan index fell to a near-two month low. The index has lost 5% in the last two weeks and has risen only once in the last 10 trading sessions.
Chinese equities rebounded on Friday but not enough to prevent the eighth weekly decline in 10 weeks. The 3.7% fall was the biggest weekly loss since January.
But China bulls do have a rare bit of good news to enjoy as official data on Saturday showed that industrial profits grew at a faster clip in June. A 3.6% year-on-year rise in profits last month followed a 0.7% gain in May, accelerating first-half gains to 3.5%.
This should lift China’s economic surprises index, which is languishing around its lowest level in 10 months.
Japanese stocks, meanwhile, will again be at the mercy of the exchange rate, which could be in for another rocky ride. The Nikkei has lost 10% in the last two weeks as the yen has rallied some 10 ‘big figures’ to a four-month high of 152 per dollar.
Japanese money markets are attaching a 70% probability on a 10 basis point rate hike from the BOJ on Wednesday, and U.S. rate futures suggest it’s a near certainty that the Fed stays on hold.
Can the yen break through 150 per dollar?
Asia’s economic calendar is light on Monday but brimming with top-tier events and releases later in the week. The same goes for the corporate calendar, with major earnings releases from Japan rolling out as the week progresses.
