By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The final quarter of the year is upon us, and the sense of caution that characterized Tuesday’s opening couldn’t be further removed from the exuberance and optimism that marked the end of the third quarter 24 hours earlier.
Investors fled risky assets such as stocks for the safety of U.S. Treasuries, gold and the dollar as Iran fired a salvo of ballistic missiles into Israel on Tuesday in retaliation for Israel’s campaign against Tehran’s Hezbollah allies in Lebanon.
The S&P 500 and global stocks had their worst day in a month, 10-year U.S. bond yields recorded their sharpest decline in a month, and oil rose 3% after rising 5% at one point.
On top of the escalation of tensions between Israel and Iran, the sense of gloom hanging over markets on Tuesday was reinforced by the sharp decline in a closely watched model estimate of US GDP growth.
The Atlanta Fed’s GDPNow model estimate for third-quarter U.S. GDP growth was cut to 2.5% on Tuesday from 3.1% last week. The drop of six-tenths of one percent was the biggest decline since the Q3 tracking estimates were launched in late July.
This will set the tone for markets across Asia on Wednesday. Chinese markets are closed for Golden Week, and the main economic releases will be inflation and manufacturing purchasing managers’ index data from South Korea, and consumer confidence data from Japan.
Although oil spiked sharply on Tuesday, the deeply negative year-over-year price of oil is a major reason why inflation is cooling around the world, and much faster than many economists and policymakers expected.
In many cases, as in the eurozone, inflation is already at or even below the 2% target that many central banks are aiming for. Figures from Seoul are expected to show that annual consumer inflation in South Korea fell to 1.9% in September from 2.0% in August.
That would be the lowest, and also the first time below that 2% threshold, since March 2021.
Japanese markets should be a bit calmer on Wednesday, even as Nikkei futures point to a more than 1% decline at the open, as the dust settles on the major political turmoil of recent days.
Investors are getting used to what to expect from new Prime Minister Shigeru Ishiba, once considered a monetary policy hawk, who now appears to have softened his stance.
He said on Tuesday he hoped the Bank of Japan would maintain easy monetary policy “as a trend,” and that his government would adopt former Prime Minister Fumio Kishida’s economic policies and “ensure that Japan fully emerges from deflation.” .
Here are the key developments that could give more direction to Asian markets on Wednesday:
– South Korean inflation (September)
– South Korean Manufacturing PMI (September)
– Japanese consumer confidence (September)
(Reporting by Jamie McGeever)
