Asian markets are set for a positive open on Monday, taking the baton from Wall Street on Friday after a surprise fall in the U.S. unemployment rate bolstered the view that an economic ‘soft landing’ will be achieved and recession avoided.
Looked at through a ‘good news is good news’ prism, the rise in Treasury yields and the dollar on Friday should not be a drag on Asian and emerging markets, like they often are.
The two-year U.S. yield posted its biggest rise since June after data showed that the unemployment rate fell to 3.7%. Any lingering hopes for a rate cut this week quickly vanished, and the first fully priced rate cut was pushed back to May next year from March.
If the S&P 500 and Nasdaq‘s rise on Friday to their highest levels since early 2022 lifts most Asian markets on Monday, Chinese assets may struggle after figures this weekend showed that deflationary pressures intensified in November.
Consumer prices fell 0.5% both from a year earlier and compared with October, much deeper than the median forecasts in a Reuters poll of 0.1% declines for both. The year-on-year decline was the steepest since November 2020.
Factory-gate deflation deepened too – producer prices have been falling on a year-on-year basis or more than a year now – indicating rising deflationary pressures, weak domestic demand, and increasing doubt over the economic recovery.
Figures like these will only deepen calls for more stimulus from Beijing, and are a reminder as to why Chinese markets are underperforming so much – China’s blue chip CSI 300 index has lagged the MSCI World Index, S&P 500, and Nikkei 225 this year by 24%, 27% and 30%, respectively.
