A preview of the day ahead in Asian markets.
Asian investors are heading into Tuesday's session with some optimism after Monday's rise in global stocks and risk appetite, but wary of a strong U.S. dollar that could wipe out that optimism in the blink of an eye. eye.
Concern about China's economic situation, even though the Purchasing Managers' Index showed in the last 72 hours that factory activity in November grew at the fastest pace in months, will also be a brake on regional optimism.
The resumption of Chinese manufacturing activity, growing concern about the outlook and the renewed strength of the dollar are largely linked to US President-elect Donald Trump's hardline stance on trade and threats of high tariffs that he will weigh on the country when he takes office next month.
The rant he launched on social networks on Saturday to countries considering turning away from the “powerful” American dollar seems to have had an initial effect. Excluding November 6, the day after the US election, the dollar's 0.6% appreciation on Monday was its biggest increase in six months.
Europe's economic and political woes, particularly France, are certainly playing a role, while the yen is supported by bets on a possible interest rate hike from the Bank of Japan later this month.
But the dollar's independent strength cannot be ignored, and bullish sentiment toward emerging markets rarely sustains for long when the dollar is on the move.
China's weakness cannot be ignored either. Some analysts say the positive PMI surprises are due to an increase in output before Washington imposed tariffs, and that China's underlying economic health remains fragile.
The Chinese bond market seems to confirm this assertion. On Monday, the 10-year yield fell below 2% for the first time, while the 30-year yield is now below its Japanese equivalent for the first time in at least 20 years.
Still, investors will be reassured by the rise in the S&P 500 and the Nasdaq, which hit new highs on Monday, and by the fact that US Federal Reserve Governor Christopher Waller said he was leaning towards a drop in interest rates later this month.
Remarkably, after Monday's peak, the S&P 500 posted more than 50 record highs this year. But will this be enough to boost Asian markets on Tuesday?
Tuesday's Asian calendar is light, with South Korean inflation the only major economic indicator. This is one of several CPIs released this week, following Indonesia's on Monday and ahead of the latest figures from the Philippines, Taiwan and Thailand later in the week.
Economists polled by Reuters expect South Korea's annual headline inflation rate to accelerate in November to 1.7%, from a three-and-a-half-year low of 1.30% in October . This would be the largest increase since August last year.
Here are the main developments that could steer the markets on Tuesday:
– Consumer inflation in South Korea (November)
– Bank of Thailand Governor Sethaput Suthiwartnarueput speaks.
– Intervention by Pichai Chunhavajira, Thai Minister of Finance
