Asian equity markets are poised for a mixed session, with Japanese stocks looking optimistic while Chinese equities may face a downturn. Notably, the ChiNext index, a crucial gauge for the riskier segments of China’s stock market, is undergoing a significant decline. This downturn is particularly significant as it aligns with a decrease in one of the primary drivers of Chinese equities: speculative activities, especially margin trading debt. Adding to the risks is the People’s Bank of China (PBoC)’s decision to hold its 1-year Medium-term Lending Facility (MLF) rate steady at 2.50%, which was a slight letdown for those who expected a rate reduction in light of the current economic slump.
As the week commenced, global markets were relatively subdued, awaiting a series of pivotal events. Moving into today’s trading session, the spotlight turns to regional Federal Reserve Manufacturing Data and the U.S. Treasury’s 2-Year Note auction. The focal point, however, will be on the forthcoming U.S. Q4 GDP estimate this Thursday, with key insights into consumer spending and Personal Consumption Expenditures (PCE) inflation figures to follow on Friday. These data points are crucial ahead of next week’s Federal Reserve decision. The recent repricing in the yield curve has exerted downward pressure on both G10 and Emerging Market currencies against the USD. If this week’s data outperforms expectations, we might witness further hawkish repricing, potentially influencing further adjustments in pricing. Additionally, decisions from central banks are under close watch, particularly the Bank of Japan’s policy meeting tomorrow. Market participants anticipate a move towards policy normalization, and there’s a growing expectation that the Bank of Japan might soon exit the world’s last negative rate policy, with projections now suggesting April as the likely time for the central bank to abandon its Negative Interest Rate Policy.
