Marketmind: Rate hopes trump economic jitters

By Thomson Reuters Feb 15, 2024 | 3:48 PM

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Asian stocks are on track for their fourth weekly rise in a row if they can avoid falling more than 1% on Friday, which would mark the longest winning streak in over a year.

The regional and global backdrop for Asian markets on Friday looks relatively supportive, at least from an interest rate perspective, if not an economic one.

Figures on Thursday showed that Japan and Britain slipped into recession at the end of last year, and U.S. retail sales last month fell much more than expected. But the upshot of that could be relatively looser monetary policy.

That’s how it played out on Wall Street and in Japan on Thursday – the Nikkei chalked up another 34-year high to come within 1,000 points of its all-time peak, as traders bet that Japan’s shock slide into recession will force the Bank of Japan to go slow on normalizing monetary policy.

The Nikkei is the stock market darling of the year, up a staggering 14% since Jan. 1. The yen’s fall through 150.00 per dollar to within sight of its recent 33-year low has been a key driver of the Nikkei’s rally, but not on Thursday – it got swept along in the global wave of non-dollar currency appreciation.

Japan’s GDP figures were remarkable, with the 0.4% annualized contraction in the October-December period deeper than even the gloomiest forecast in a Reuters poll of 16 economists. The consensus, meanwhile, was +1.4%.

Surprisingly weak U.S. retail sales data on Thursday also weighed on Treasury bond yields and the dollar, which was enough to keep Wall Street in the green for a second day.

Juiced by the ongoing tech and AI boom, and strength in recent earnings, the S&P 500 has risen 14 out of the last 15 weeks, something it last did in 1972.

The index is now flat on the week, leaving it finely poised to register a 15th-out-of-16-weeks winning streak on Friday. It has only managed this seven times in its history, the last occurrence also being in 1972.

All in all, Asian markets seem set for a fairly positive end to the week on Friday, and perhaps a more somber tone will set in next week. When China re-opens.

The Asian and Pacific economic calendar on Friday includes Japan’s tertiary manufacturing index, South Korean unemployment and trade, New Zealand’s manufacturing PMI, the final estimate of fourth quarter GDP from Malaysia, and Singapore’s trade data.

Here are key developments that could provide more direction to markets on Friday:

– New Zealand manufacturing PMI (January)

– South Korea unemployment (January)

– Malaysia GDP (Q4, final)

(By Jamie McGeever)