Asian equities appear to have stopped the recent rot, with some benchmark indices on Monday chalking up their best day in two weeks – the MSCI Asia ex-Japan index rose 0.7%, the Hang Seng rose 1.3%, and Japan’s Nikkei jumped 2.1%.
That was the Nikkei’s best day since April – an impressive bounce from a three-month low, but it did follow eight straight down days, its worst run in almost three years.
Can Asia take heart from U.S. and world stocks’ performance on Monday?
The recent rotation out of U.S. Big Tech into small caps stalled, with the Russell 2000 heavily underperforming tech and the Nasdaq more broadly. The S&P 500 barely rose 0.1% – a tiny gain, but the first time in two weeks that the index has risen two days in a row.
The Bank of Japan’s policy decision on Wednesday looms larger over Japanese assets. Sources have told Reuters that a rate hike will be discussed and policymakers may also unveil a plan to roughly halve its bond purchases in the coming years.
Money market pricing on the BOJ’s move on rates still leans toward a 10-basis point hike but tightening will be slow – barely 20 bps of rate hikes are priced in by year end.
