Marketmind: On a roll, China open again

 Marketmind: On a roll, China open again

An overview of the upcoming day in Asian markets. output 

Following the Lunar New Year vacation, China's markets open on Monday. Investors are hopeful that the region's positive momentum from last week can hold, despite indications that U.S. inflation and therefore interest rates may be stickier than anticipated.

Asian equities are doing quite well; last week saw the MSCI Asia & Pacific ex-Japan index have its best week of the year, up 2%, and its longest weekly winning streak of four consecutive "up" weeks in over a year.

Did China's closure happen by coincidence? Monday, when China resumes trading, is when investors might make their decisions.

The China doom may be passing, if only momentarily, according to certain indications. Official data released on Sunday revealed that tourism receipts during the Lunar New Year holidays exceeded pre-COVID levels, and stocks have recovered from five-year lows.

Though it's unclear how long the tourism boost will last, the statistics will be helpful to policymakers who are fighting deflation fears, poor consumer demand, sluggish economy, and a collapsing property industry.

When rolling over medium-term loans that are about to mature, China's central bank on Sunday maintained a key policy rate steady, as was predicted. This suggests that later this week, benchmark lending prime rates will likewise be kept on hold.

In order to sustain the economy at a time when indications of ongoing deflationary pressure demand for increased intervention, Beijing is doing a delicate balancing act. Aggressive easing, however, carries the danger of reinforcing capital outflows and yuan devaluation pressure.

Unexpectedly strong producer and consumer price inflation data from the United States last week increased Treasury yields, boosted the currency, and cast doubt on the extent of the Fed's rate-cutting plans for this year. Is there going to be another inflation wave?

Any euphoria in Monday's trade on the Asian markets could be dampened by this widespread tightening of financial conditions. The index of emerging market financial conditions maintained by Goldman Sachs reached its highest point in three months last week. output 

Conversely, the Japanese market boom doesn't seem to be slowing down. Thanks to a very weak currency and increased optimism about corporate Japan's profits outlook, the Nikkei gained 4.3% last week and is currently up 15% for the year.

Given that the Nikkei is just a few hundred points away from fresh all-time highs, this is perhaps the right time for some profit-taking. However, a new record is likely if the dollar stays above 150 yen and tests its most recent 33-year top, which is located at 152 yen.

The highlights of Asia's economic calendar for Monday are the GDP for Thailand's fourth quarter and the orders for machinery from Japan. Data on foreign direct investment from China may also be made public.

Later in the week, a plethora of PMI surveys from over the continent, Reserve Bank of Australia meeting minutes, and interest rate decisions in South Korea and Indonesia will help set the tone.

The following significant events could provide Monday's markets extra direction:

- GDP of Thailand (Q4)

- January trade with Thailand

- December machinery orders from Japan

(Edited by Diane Craft; written by Jamie McGeever)