News
Markets upbeat ahead of China data leak
By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Asian markets enter Friday’s session with the intention of ending a strong week on a positive note, and there appears to be no obvious reason why the recent rally should be reversed unless investors opt for a holding session of profits before the weekend.
China’s monthly “data dump,” when Beijing simultaneously obtains several high-level economic indicators, could do much to set the tone for the market across Asia on Friday.
The MSCI Asia ex-Japan stock index is forecasting a sixth consecutive rise, which would mark its best performance since January last year. Barring a drop of almost 3%, the index will close the week in positive territory for the fourth week.
Wall Street ended lower on Thursday, but not before the Dow Jones Industrials hit 40,000 for the first time, while dollar and bond yields rose.
For the week, the dollar and yields are lower and stocks are higher. Overall, this week’s economic and inflation data from the world’s largest economy was weak, refueling investors’ belief that US interest rates will be cut soon.
A set of high-level indicators from China released on Friday will shed light on how the world’s second-largest economy is performing – or not – and whether it is on track to meet authorities’ 5% GDP growth target for this year.
China’s economic surprise index is at its lowest level in the last three months, proof that activity has been weaker than expected or that forecasts were too high to begin with. If there is consensus, it will gravitate towards the first and not the second.
The latest figures for house prices, retail sales, urban investment, industrial production and unemployment are expected to show that economic activity accelerated last month.
The dark cloud of deflation hangs heavily over the economy – the prolonged decline in producer prices could further drag down consumer prices – so a set of numbers in line with, or exceeding expectations, on Friday would be welcome news for Chinese bulls and policymakers alike.
Chinese bond yields have fallen to historic lows and the yield differential between the US and China has widened to historic levels. These extreme scenarios have cooled in recent weeks – Friday’s encouraging economic numbers will likely prolong this “normalization” even further.
Meanwhile, Japan’s figures released on Thursday showed the world’s third-largest economy performed much worse in the first quarter than economists had expected, as first-quarter GDP shrank at an annualized rate of 2.0. %.
This is the kind of number that could make the Bank of Japan think twice about “normalizing” its policy. Yen and Japanese bond yields fell on Thursday but are still slightly higher for the week.
The story continues
Here are key developments that could provide further guidance to markets on Friday:
– China property prices, retail sales, urban investment, industrial production, unemployment (April)
– Malaysian GDP (1st quarter)
– Hong Kong GDP (1st quarter)
(Reporting by Jamie McGeever; Editing by Josie Kao)