Jamie McGeever
(Reuters) - The outlook for Asian markets for the day ahead.
A pause in the global bond selloff took the wind out of the dollar's sails and allowed stocks to regain their footing early on Tuesday, but volatility on Wall Street ahead of U.S. inflation data could put Asian markets back on the defensive on Wednesday.
The loss of momentum in the U.S. dollar and Treasury yields should bring some welcome respite to emerging and Asian markets. But the reversal in U.S. stocks may be short-lived, especially if U.S. consumer price index (CPI) inflation data declines after the Asian close.
Asian markets were active on Tuesday. MSCI's Asia ex-Japan index rebounded from a five-month low, with China's blue chips rising more than 2.5% as regulators pledged more support for the market and local chip companies' shares weakened after the United States tightened technology restrictions. rise.
However, Japanese stocks moved in the opposite direction after Bank of Japan Deputy Governor Ryozo Himino said a rate hike was likely next week. The Nikkei 225 posted its biggest drop in two and a half months, falling 1.8%.
Such is the regional backdrop for Wednesday's opening, where the main event will be Bank Indonesia's policy decision. Affected by recent currency fluctuations, Bank Indonesia is widely expected to keep its key interest rate unchanged at 6.00%.
With inflation at the lower end of the central bank's target range of 1.5%-3.5%, monetary policy aims to stabilize the rupee, which is down about 7% against the dollar from its peak in September.
Like most emerging countries, Indonesia has been hit hard by a surge in U.S. bond yields and the dollar's "wrecking ball", with tighter financial conditions limiting the Bank Indonesia's ability to ease policy.
Goldman Sachs said Indonesia's financial conditions have deteriorated sharply since late September, mainly due to rising long-term interest rates and falling stock markets. It is currently the tightest since October 2023 and close to the tightest since October 2022.
As the January 20 inauguration of US President-elect Donald Trump approaches, the threat of a global trade war and the imposition of punitive tariffs by the United States on many countries, especially China, continue to weigh on market sentiment.
China and the EU have a strong "symbiotic" economic relationship and Beijing hopes the EU can become a "trustworthy partner," Chinese President Xi Jinping said on Tuesday when he met with European Council President Antonio Costa.
Meanwhile, Trump said on Tuesday that he would create a new department called the Internal Revenue Service to "collect duties, tariffs and all revenue from foreign sources."
The South Korean won, one of the best-performing Asian currencies this year, is likely to fall on Wednesday after Yonhap reported that authorities investigating the impeachment of President Yun Seok-yeol were executing an arrest warrant at his official residence.
Here are the key developments Wednesday that could provide more direction for the market:
- Indonesian interest rate decision
- South Korea's unemployment rate (December)
- Japan Service Tankan Survey (January)
(Reporting by Jamie McGeever)