Meanwhile, key Asian economic indicators are due for release on Friday, not least producer and consumer price index figures from China, where attention will also be turning towards the presidential elections in Taiwan on Saturday.
Chinese PPI has been running negative on a year-over-year basis every month since October 2022. That is expected to have continued into December, with annual PPI inflation seen slowing to -2.60% from -3.0% in November.
Consumer prices have been drifting in and out of deflationary territory for several months too. November’s annual rate of -0.5% was the lowest in three years, and figures on Friday are expected to show that the pace of price declines slowed marginally to -0.4% in December.
Deflation remains a bigger risk in China than inflation. With economic activity struggling to properly recover from the pandemic-related shutdowns, pressure on Beijing to inject substantial fiscal and monetary stimulus will persist.
Trade activity is expected to have picked up in December year-on-year from November, especially exports. But recent data from Taiwan and Japan – two of China’s largest trading partners – suggest caution is required here.
In India, industrial production and inflation will be released.
This week, HSBC’s fixed income team said India is their top pick for emerging market local sovereign debt in 2024. They reckon the fair value for the Indian government 10-year bond yield is 6.50-7.00% – it is currently 7.17% – and expect foreign demand for the paper will rise this year.
