By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
Attention turns Monday to China and the release of November inflation data, with global investor sentiment generally upbeat as the brutal rally on Wall Street continues, but tempered by an increasingly volatile geopolitical backdrop.
The overthrow of Syrian President Bashar al-Assad and the uncertainty created in the already volatile Middle East, the criminal charges against South Korean President Yoon Suk Yeol and the political chaos in France are all potential reasons for investors to to play it safe.
If so, U.S. Treasuries and other government bonds, gold and the dollar could all see increased interest in early trading on Monday. The rapidly changing events in South Korea could spread throughout Asia, and the country’s Finance Ministry and central bank are expected to do everything they can to ensure financial stability and protect the countries won .
The currency has weakened by about 10% since late September, hitting a two-year low last week. A rise of 1,445 won per dollar, which is eminently possible, will mark the weakest level since the global financial crisis in early 2009.
On the other hand, the prospect of further interest rate cuts by the US Federal Reserve and falling Treasury yields, combined with solid US employment data on Friday, pushed Wall Street to another record high.
While global currency market volatility is increasing, US stock and bond market volatility is at its lowest in months. As long as that remains the case, Wall Street appears to be able to end a remarkable year on solid footing.
Investors in Asia will have their first opportunity on Monday to react to Friday’s US non-farm payrolls report, which showed solid job growth but a rise in the unemployment rate last month.
Interest rate traders appeared to have given more weight to the unemployment rate; they now fully expect a quarter-point rate cut from the Fed on December 18, and have priced in an additional 10 basis points of easing over the course of next year.
The main data focus in Asia on Monday will be consumer and producer price inflation from China. The pace of monthly consumer deflation is expected to have accelerated from -0.3% to -0.4%, and this would be the deepest pace of month-on-month price declines since March. Annual inflation increases from 0.3% to 0.5%.
However, producer prices are expected to remain deep in deflation, with factory prices falling 2.8% year-on-year in November, little changed from October’s 2.9% decline.
Investors will now also look ahead to China’s upcoming Politburo meeting, where Beijing’s top policymakers will outline their priorities for the coming year. For investors, the government’s 2025 growth target and budget will be two of the most important.
