The regional economic calendar on Tuesday is light, the highlights being South Korean producer price inflation for September, October’s flash purchasing managers index data from Japan and Australia, and a speech from Reserve Bank of Australia governor Michele Bullock.
All of these could trigger short-term moves in the respective currencies, which all gained ground to varying degrees against the beaten down dollar on Monday.
September’s PMIs showed that manufacturing activity in Japan and Australia shrank and services sector activity grew, although growth in Japan was the slowest this year.
The big picture, however, is still dominated by the ebb and flow of the U.S. Treasuries market. The 10-year yield finally broke above 5.0% on Monday but quickly tumbled, and the peak-to-trough slide of 20 basis points pushed U.S. stocks into positive territory for most of the day and dragged down the dollar.
All of that paves the way for a ‘risk-on’ day across Asia on Tuesday, right? Not necessarily.
Wall Street gave back most of its gains in late trading, with only the Nasdaq out of the three main indexes closing in the green – an intuitive move, perhaps, given the tech sector’s sensitivity to interest rates.
And while a broad easing of financial conditions on Monday – lower Treasury yields and a weaker dollar – should support emerging market assets, Wall Street’s late downward drift will warrant caution.
