By Jamie McGeever
A look at the day ahead in Asian markets.
Asian markets on Monday could kick off the last week of the month in a bullish mood, as investors looking to claw back some of the previous session's losses draw support from the lowest volatility on Wall Street in nearly four years.
The VIX index of S&P 500 implied volatility - the so-called Wall Street 'fear index' - closed at 12.46 on Friday, its lowest close since January 2020. This, and possible hopes for a more lasting ceasefire between Hamas and Israel, could boost sentiment and risk appetite at the open on Monday.
Looking ahead to the rest of the week, the stand-out regional events that could move markets include policy decisions from New Zealand, South Korea and Thailand, inflation figures from Australia, and third-quarter GDP data from India.
The first purchasing managers index (PMI) numbers for October start trickling in too, which will give a glimpse into how private sector manufacturing and services activity held up this month in a number of key countries including China, Japan and Australia.
Monday's regional data calendar is light, with the highlight being Chinese industrial sector profits for the first 10 months of the year.
Year-to-date profits have fallen every single month since June last year, reaching a nadir of -22.9% in February this year. But the pace of decline has slowed since, indicating that corporate China is getting its house back in order. Slowly.
The People's Bank of China has steered the yuan down from its multi-year lows against the dollar to its strongest level since late July, but investors are still extremely cautious on Chinese assets.
China's CSI300 index of blue chip stocks last week fell for a second week in a row, underperforming regional and global peers - MSCI's Asia Pacific ex-Japan and Emerging Market stock indices both rose for a second week in a row, and the MSCI World index and Wall Street's big three all rose for a fourth week.
Three central banks in the Asia & Pacific region hold policy meetings this week. Like Bank Indonesia last week, the central banks of New Zealand, South Korea and Thailand are all expected to leave key rates unchanged.
With the U.S. Federal Reserve probably on hold for the next six months or so, according to current rate futures market pricing, Asian central banks will probably refrain from policy changes and remain in a holding pattern too.
Inflation in some countries is sticky and exchange rates are weak, so policymakers will be wary of cutting rates prematurely. But, broadly speaking, no further tightening from the Fed gives central banks in Asia a bit more breathing room.
On the political front, meanwhile, China, Japan and South Korea have agreed to restart cooperation and pave the way for the first summit between the three since 2019, in the latest move to ease tensions between the Asian neighbors.
Here are key developments that could provide more direction to markets on Monday:
- China industrial sector profits
- Japan service sector PPI
- U.S. Treasury auctions two- and five-year notes
(By Jamie McGeever; Editing by Diane Craft)
