Asian markets on Friday will look to take heart from Wall Street’s bounceon Thursday, ending a rocky week on a steadier footing as investors digest the latest twists in the U.S. rate outlook, China’s travails and Japan’s solid start to the year.
China’s CSI 300 index of blue chip stocks will likely close in the red this week, but a gain of around 0.5% will avert the biggest weekly fall since October, while the MSCI Asia ex-Japan index is on track for a slender weekly gain.
Japan’s Nikkei 225 fell on Thursday but still closed out January with a gain of 8.5% and a series of fresh 34-year highs, while the yen’s 3.6% fall was its biggest monthly depreciation in almost a year.
A bit of consolidation on both fronts on Friday and into next week would not be a huge surprise. Or shouldn’t be.
Currency dealers work in front of electronic boards showing the Korean Composite Stock Price Index (KOSPI) and the exchange rate between the U.S. dollar and South Korean won at a dealing room of a bank, in Seoul, South Korea, March 16, 2023. REUTERS/Kim Soo-hyeon
The regional economic and policy calendar on Friday is light with only South Korean consumer inflation, Australian producer price inflation and Singapore’s manufacturing PMI on tap, leaving investors to take their cue from global markets.
That should mean a feel good factor runs through Asia at the open on Friday after Wall Street’s big three indices rebounded 1% or more on Thursday.
Earnings reports from tech giants Apple <AAPL.O>, Amazon.com<AMZN.O> and Meta Platforms <META.O> after the bell on Thursday generally beat analysts’ expectations, which should add to that positive sentiment.
All this will help wash over the flurry of worry around U.S. commercial real estate and regional banks – at least for now – although that part of the market remains under pressure. The KBW Regional Banking index <.KRX> fell 2%, following its 6% slide the day before.
Asian currencies, meanwhile, end the week better bid as the dollar’s gentle drift lower continues. The decline has been nothing major, but the momentum that pushed the greenback higher across the board in the early part of the year has definitely faded.
The main reason is probably the slide in U.S. bond yields – the 10-year yield retreated to 3.86% on Thursday, its lowest this year – although there appears to be a bit less conviction in the market’s dovish outlook for the Fed this year.
A higher-than-expected reading of South Korean inflation could give the won a shot in the arm on Friday.
Graphics are produced by Reuters.
Key developments that could provide more direction to markets on Friday:
South Korea inflation (December)
Australia PPI inflation (December)
Singapore manufacturing PMI (January)
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